The CEO of the largest bank in the world compared the $9 trillion of cash released during the pandemic with heroin. He also suggested that the US Economy was addicted to debt.
Jamie Dimon warned that the global economy could be impacted by a “dangerous mix” of risks.
Dimon said that the largest economy in the world was at the forefront of innovations, but he also added “we are now spending a great deal of money”.
He said that the stimulus cheques worth trillions of dollars, which were given to Americans in lockdown, and the $4 trillion printed by US Federal Reserve for the purchase of bonds are like heroin.
You’d probably feel good if you had $5 trillion to give away. Stock markets are up and companies are making more money.
Mr Dimon warned recently of the “most hazardous time in the world’s history”. He suggested that companies would see large drops in profits as the economy returns to a world without government handouts and cheap cash.
Mr Dimon warned that the war between Israel and Hamas, as well as the conflict in Ukraine, added to the multitude of risks facing an increasingly fragile global economy.
You can’t just sit there and pretend that nothing bad will happen. “I’m not scaring people, but I am more of the opinion that something could go awry,” he said at the Global Investment Summit in London organised by Rishi Sunder.
He warned that the inflation rate was likely to stay higher for longer. This is partly due to the move towards net zero, and increased government spending.
“We’re in this sugar high, and I don’t say this will end in a Depression [but] I believe there are more inflationary forces at work.”
“There is a greater chance that the rates will go up, the inflation won’t disappear and all of these things create more problems.”
Despite his pessimism Mr Dimon praised UK’s economy for its innovative, entrepreneurialism, and “pro growth” policies. He said he will “take notes” and “send them back to the American Administration”, adding that the “happy talks” about the US economic must be taken into context with massive government spending.
Andrew Bailey, Governor of Bank of England , raised concerns about the UK’s prospects in comments that threatened to overshadow Prime Minister Cameron’s promise at the summit that he’d “fix” Britain’s problems by tax cuts.
Mr Bailey, in an interview with The Chronicle, Newcastle, said: “If I look at the potential growth rate of the economy, it’s definitely lower than in most of my career.”
Sunak said that the UK growth rate is too low.
He told a group of investors and bankers, including Mr. Bailey, in Hampton Court Palace, London, “We want to see it higher.”
The Prime Minister stated that a “large portion” of the gap in productivity between the UK and the faster-growing G7 countries like the US can be attributed to “lower investment by businesses, which has characterized the UK’s economy for decades”.
Mr Sunak said he “took steps to fix it”, highlighting the move last week to make a prominent business tax break permanent.
In his opening speech, he stated: “Make no mistakes. We are cutting taxes.”
The backdrop of the summit was the general election and Tory infighting on immigration. It also emerged that Labour hosted a breakfast the morning before the event, attended by nearly three dozen business leaders including several British CEOs.
Stephen Schwarzman, CEO of Blackstone private equity, has praised the UK for its “pro-business” attitude. He added that his company is examining the opportunities in student housing and data centers across Europe. Schwarzman described the UK, despite the uncertainty, as being one of few places with “steady growth”.
He also criticized US President Joe Biden’s Inflation Reduction Act, which offers hundreds of billions for green investments in the world’s largest economy.
Mr Schwarzman stated: “We are currently running deficits in the amount of $2 trillion per year (£1.6 trillion). I’m not certain that this is a model everyone would want to copy.
“I’m not sure if I recommend it to the UK.”
S&P Global analysts warned that UK will face another year of “stagflation”, as high interest rates designed to control inflation, are holding back growth.
The headline inflation rate has dropped from September’s 6.7% to 4.6pc, a fall that was attributed to the drop in energy prices.
The financial markets predict that the first rate reduction, to 5pc in summer 2024, will happen.