According to the Zhitong Finance APP, David Kelly of JP Morgan warned this week that while the United States is &#34;heading towards bankruptcy,&#34; the process is slow enough that it has not yet triggered market panic. Currently, U.S. national debt has surpassed $37.8 trillion, with interest payments exceeding $1.2 trillion. Kelly pointed out that even if the economy maintains moderate growth, the debt-to-GDP ratio, which has reached 99.9%, may continue to rise. Although tariff revenues can provide some relief and temporarily ease deficit pressures, he cautioned that changes in political decision-making or an economic slowdown could quickly worsen the fiscal situation. Therefore, he advises investors to diversify their investments to reduce reliance on U.S. assets before the &#34;slow bankruptcy&#34; accelerates.
David Kelly, Chief Global Strategist at JP Morgan Asset Management, wrote in a report this week that the U.S. is heading towards bankruptcy, but due to the government's &#34;slow pace of bankruptcy,&#34; there is currently no panic.
Kelly stated that the U.S. economy is facing a series of issues (such as geopolitical conflicts, trade frictions, immigration policy adjustments, and government shutdowns), and one of the key long-term issues is how the U.S. government will repay its debt.
To reduce the scale of federal debt (and thus alleviate overall national debt pressure), President Trump initially invited Tesla CEO Elon Musk to lead the establishment of the &#34;Department of Government Efficiency (DOGE),&#34; aiming to cut $2 trillion in spending from the federal budget.
However, the two later publicly fell out over the White House's proposed &#34;One Big Beautiful Bill Act.&#34; The Congressional Budget Office (CBO) estimates that this bill will increase national debt by an additional $3.4 trillion over the next decade. In response, the White House stated that its tariff policies would offset the new spending from the bill while compensating for the revenue loss caused by tax cuts. The CBO also predicts that by 2035, tariff revenues will help reduce the total deficit by $4 trillion.
The scale of U.S. national debt continues to soar. National debt has exceeded $37.8 trillion, with interest payments alone requiring $1.2 trillion. Both Jamie Dimon, CEO of JP Morgan, and Jerome Powell, Chairman of the Federal Reserve, have expressed concerns about this.
Kelly believes that although investors are aware of the issues behind the current fiscal data, this crisis will gradually manifest over the long term.
&#34;The question I am most often asked by investors and financial advisors is: 'When will the federal debt fully explode into a crisis?' My usual answer is that we are indeed heading towards bankruptcy, but the process is very slow. The global bond market is very clear about the trajectory of U.S. debt. Even today, the U.S. government can still issue 30-year Treasury bonds at a yield of 4.6%, which indicates that the market believes the government still has room to borrow further,&#34; Kelly wrote in yesterday's report.
<h2>Is it optimism or naivety?</h2>
Kelly pointed out that in the short term, ordinary investors may have reason to remain optimistic. For example, he mentioned that tariff revenues have already reached a considerable scale (according to White House data, tariff revenues reached $31 billion in August); additionally, recent estimates from the CBO and the &#34;Committee for a Responsible Federal Budget&#34; show that the U.S. deficit-to-GDP ratio for fiscal year 2025 will decrease from last year's 6.3% to 6%
The decline in the proportion of debt to economic growth is a key indicator of concern for U.S. creditors. A country's debt-to-GDP ratio is an important basis for measuring its debt repayment capacity or the need to issue bonds at higher interest rates.
However, Kelly warns: &#34;It is necessary to carefully examine this data. The total amount of federal debt held by the public is approaching $30.3 trillion, which we estimate to be about 99.9% of GDP. On this basis, if future nominal GDP growth remains around 4.5% (including a 2.0% real growth rate and a 2.5% inflation rate), then as long as the budget deficit rate exceeds 4.5%, the debt-to-GDP ratio will continue to rise. According to our assumptions, by September 30, 2026, this ratio will increase from 99.9% on September 30, 2025, to 102.2%.&#34;
He added that the speed of debt growth may even be faster than the above predictions.
Taking tariffs as an example, the legality of the Trump administration's tariff policy remains in doubt. Kelly pointed out that if the U.S. Supreme Court rules the policy unconstitutional, &#34;it will at least force the government to rework the plan—either by implementing alternative tariff policies based on other authorizations or by pushing Congress to pass relevant legislation. Additionally, this may require the government to refund a large amount of tariff payments collected in recent months.&#34;
Moreover, the current estimates of the deficit are based on the premise of &#34;no economic recession and no need for large additional expenditures on domestic and foreign priorities.&#34; However, doubts about whether some U.S. states may have fallen into a technical recession are intensifying. Kelly stated: &#34;Therefore, viewing the FY2025 deficit rate of 6.7% as a 'conservative estimate' of this year's fiscal deficit may be more reasonable.&#34;
Kelly believes that for investors, the core strategy should be to diversify their portfolios to guard against a rapid outbreak of the U.S. debt crisis. &#34;There is a risk that political decisions could lead to a rapid deterioration of the federal fiscal situation, thereby pushing up long-term interest rates and lowering the value of the dollar. From the perspective of current asset allocation and valuation, many investors should consider diversifying their investments by increasing holdings in alternative assets and international stocks. The risk of shifting from 'slow bankruptcy' to 'rapid bankruptcy' provides a significant reason to take this action now.&#34;

JP Morgan's David Kelly warned that the United States is slowly heading towards bankruptcy, with national debt exceeding $37.8 trillion and interest payments surpassing $1.2 trillion. Despite moderate economic growth, the debt-to-GDP ratio may still rise. While tariff revenues can temporarily alleviate deficit pressures, changes in political decision-making or an economic slowdown could quickly worsen the fiscal situation. He advises investors to diversify their investments to reduce reliance on U.S. assets

- David Kelly of JPMorgan warns that the U.S. is "heading towards bankruptcy," but the process is slow enough to avoid market panic.  
- U.S. national debt has surpassed $37.8 trillion, with interest payments exceeding $1.2 trillion, and the debt-to-GDP ratio is projected to rise despite temporary relief from tariff revenues.  
- Kelly advises investors to diversify their portfolios to reduce reliance on U.S. assets, as political decisions and economic slowdowns could rapidly worsen the fiscal situation.

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JPMorgan Chase

Morgan Stanley issues a warning: The United States is "slowly heading towards bankruptcy" as massive debt combined with tariffs makes it difficult to alleviate the crisis