Jamie Dimon Photo source Company’s Website
Jamie Dimon, the head of financial behemoth JPMorgan, is so worried about the current outlook for the American economy over the summer months that he is comparing what may come to a hurricane. His comments came last week at a meeting of financial analysts.
The current economic problems that Jamie Dimon addressed began with the Covid crisis. The shutdowns caused recessions and governments were forced to spend a fortune on all of the unemployment benefits to the people who were temporarily laid off. And, in a bitter irony, as the Covid crisis ended and demand suddenly soared, supply chain problems caused by the shutdowns cause shortages so the new demand could not be met. This, of course, caused inflation.
Then, just when things were looking good again, Russia invaded Ukraine. This caused disruptions in a great many exports from the area. The invasion was followed by the imposition of economic sanctions by both the U.S. and the E.U. on not only Russia, but many Russian oligarchs. As a result, opportunities for raising new capital dried up and markets were lost in Russia.
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Then came the oil embargos. This, in turn, caused oil prices to skyrocket. As gasoline is central to every aspect of the supply chain, this caused prices to rise everywhere, not just at the pump.
So the U.S. Federal reserve had no choice but to raise interest rates. Not only because of the because of the inflation, but because the economy heated up too much as America came out of the Covid crisis, And higher interest rates mean less money for new investments and so stock markets plummeted.
It is all of this that has Jamie Dimon, and many more experts, worried about what will come over the summer. For example, world tourism industry stands to have problems as it did during Covid if people do not travel because it becomes too expensive. And a recession means people out of work and not spending money
While speaking at a financial conference in New York, Jamie Dimon told those gathered, “You know, I said there’s storm clouds but I’m going to change it, it’s a hurricane.” Acknowledging that not all hurricanes are the same, Dimon added that no one knows whether the coming hurricane will be “a minor one or Superstorm Sandy.” Hurricane Sandy, of course, devastated the eastern United States in October of 2012. The storm even caused massive flooding all over New York City and its extended metropolitan area. And New Jersey coastal towns, including Atlantic City, saw massive damage caused by huge and powerful waves.
“You’d better brace yourself,” Jamie Dimon added, explaining that his firm will therefor play it safe. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”
He also acknowledged that, in spite of inflation and falling markets, things don’t look so bad at the moment. “Right now, it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this,” added Dimon. “That hurricane is right out there, down the road, coming our way.”
But Jamie Dimon also said that while he sees “big storm clouds” on the horizon for the economy they could still “dissipate.”
As for the ongoing war in Ukraine, Jamie Dimon spoke about how there is no way for anyone to know for a certainty that it will not escalate. “Wars go bad. They go south. They have unintended consequences,” he said. And many observers are worried about what Vladimir Putin might do if he has his back pushed up against a wall due to the possibility of a humiliating defeat.
