Top US banker Jamie Dimon of JPMorgan Chase warned Saturday that the United States needs to avoid defaulting on its debt, saying the possible repercussions are unfathomable.
“You don’t want to know,” Dimon said when asked what would happen if the US is forced into default because Congress did not raise the country’s borrowing limit.
“It would ripple through the world economy in a way that you couldn’t possibly understand,” he said at a discussion held by the Institute of International Finance, a leading forum for the world’s banks.
He said it would shock the money market, where trillions of dollars in cash are invested in ostensibly top-quality securities like US debt based on expectations that the borrowers will not default.
“You don’t know the ripple effect of that through money-market funds,” stressed Dimon, head of the largest US bank by assets.
“The money markets are the most fickle markets in the world, they’re like a rabbit.”
Dimon was speaking as the White House and congressional Republicans remained deeply at odds over passing a budget and raising the US debt ceiling, a move needed to ensure the government can continue to pay its bills.
The US Treasury has repeatedly warned that as soon as October 17 it will be short of cash and forced to default on its obligations, though not saying whether it would skip debt payments or others, like social security payments to retired Americans.
With no compromise apparent, and the government partially shut down now for 12 days due to lack of a budget, Dimon warned that the deadline was looming.
“As you get closer to it, the panic will set in,” he said.
On the other hand, he emphasized: “The US cannot default. I think every responsible person knows that.”