Date: 2024-08-16 Page is: DBtxt003.php txt00022749
BANKING AND FINANCE
JAMIE DIMON
FINANCE ... JPMorgan CEO Dimon sums up U.S. economy in one paragraph — and it sounds bad
JAMIE DIMON
FINANCE ... JPMorgan CEO Dimon sums up U.S. economy in one paragraph — and it sounds bad
Jamie Dimon, chief executive officer of JPMorgan Chase & Co. ... Christophe Morin | Bloomberg | Getty Images
Original article: https://www.cnbc.com/2022/07/14/jpmorgan-ceo-dimon-sums-up-us-economy-in-one-paragraph-and-it-sounds-bad.html
Peter Burgess COMMENTARY
Clearly energy is at the core of the global inflation that has been experienced over the past several months. There is very little the Federal Reserve or other Central Banks can do with the tools they presently have at their disposal.
As things stand, the energy industry has no incentive to do anything else except to maximise its profits that it can earn from its existing investments ... and it is doing this.
The banking and finance industry is Another segment of the global economy that is enabling inflation. They do this in two ways: (1) by maintaining a high level of investment in the energy segment taking care to downplay the issue of 'stranded assets', and (2) by most major banks operating very large scale energy trading floors.
Governments in general have been very 'nice' to the energy industry when it comes to taxation ... especially in the United States. Early in my career I did some of the grunt work preparing tax returns for some of the UK's richest people and companies. Back then, there was an 'excess profits tax' that had been imposed during WWII as a disincentive to aggregious profiteering. In more recent times, it seems that those with wealth and power embrace profiteering as a natural advantage of a free market capitalist system no matter that it degrades quality of life for the majority of society.
Over the past three years ... more or less ... there have been all sorts of disruptions within the economy. Global supply chains have become far too fragile, and a series of issues around specific products should have been an early warning. Nothing, however, prepared the gobal logistics industry for the many changes that resulted from the Covid pandemic and the waves of lock-down and restart that changed all the established trade patterns.
Quite reasonable government initiatives to mitigate some of the social impact of the pandemic resulted in the maintenance of relatively strong consumer demand, while at the same time health restictions constrained the production and flow of goods ... and aggravated by many missteps in almost every part of the global logistics industry.
Neither the media nor the political community have done a particularly good job of informing the general public about the actual state of the socio-enviro-economic system and how it is likely to behave in the face of rapidly changing conditions. The media in particular has tried to make a political story on top of issues like inflation, implying that governments and the governing party are the cause of inflation while giving a free pass to the business community and expecially the energy industry and the finance industry for their role in the inflation saga.
All of this is further complicated by Putin and the war in Ukraine and all the disruption that is caused by a major war. Non-belligerents will be seriously impacted by disruption in essential food chains for food grains from Ukraine and Russia that would normally be reaching world markets. This is causing not only food price inflation, but further aggravation of food insecutity and malnutrition round the world.
In the USA, it annoys me that GOP talking points blame President Biden and the Government for not solving the inflation problem while at the same time arguing for less government intervention in matters economic. The GOP also annoys me because of its enthusiasm for government interference in the choices a woman may make regarding her own body, when in other matters they are all about freedom from government interference. There was a time when I would describe myself as a proud conservative and an advocate for small government ... but the last 40 years of US public policy has pushed me more and more towards progressive policies and more and more essential government intervention in support of justice and economic fairness.
Jamie Dimon and the banking and finance industry are at the core of the problems ... and I see nothing to suggest that they are about to do anything different in the future from what they have been doing for decades. They were able to recover from the Great Recession of 2008, but will they do as well when the next financial crisis hits ???????
Peter Burgess
Written by Fred Imbert @FOIMBERT
PUBLISHED THU, JUL 14 2022 3:50 PM EDT ... UPDATED THU, JUL 14 2022 4:26 PM EDT
KEY POINTS
- On the one hand, Dimon said the U.S. “economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy.”
- “But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity ... are very likely to have negative consequences on the global economy sometime down the road,” he warned.
On the one hand, Dimon said the U.S. “economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy.”
He then rattled off a number of warning signs, saying: “But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road.”
Dimon’s comments, which were made in JPMorgan Chase’s latest quarterly release, come as investors and economists try to make out whether the economy is headed for a recession — and the recent spate of economic data isn’t providing much clarity.
The good
For the moment, there aren’t any signs the U.S. economy is entering a recession, according to comments JPMorgan executives made on their earnings call.
As Dimon said, the labor market seems to be in solid footing. Last month, the U.S. economy added 372,000 jobs, topping a Dow Jones estimate of 250,000. Meanwhile, average hourly wages grew last month at 5.1% year-over-year pace.
Is now the time to buy banks?
Consumer spending also seems to be chugging along, albeit at a subdued pace. Spending in May rose 0.2%, below a Reuters estimate for a 0.4% gain.
Even within JPMorgan’s own business there were signs of consumer strength. Consumers are still spending on discretionary areas like travel and dining. At its consumer and community banking division, combined debit and credit card spending was up 15% in the second quarter. Card loans were up 16% with continued strong new account originations.
However, the good news may end there.
The bad
The consumer price index — a widely followed measure of inflation — rose last month by 9.1% from the year-earlier period. That topped a Dow Jones forecast of 8.8% and market the fastest pace for inflation going back to 1981.
A big driver for that increase is a surge in energy prices. West Texas Intermediate, the U.S. oil benchmark, is up more than 28% in in 2022, as the war between Ukraine and Russia raises concern over already tight supply in the market.
Higher prices have also dented U.S. consumer sentiment. The University of Michigan’s consumer sentiment index hit a record low last month, tumbling to 50.
These inflationary pressures have pushed the Federal Reserve to tighten monetary policy this year more quickly than investors anticipated. Last month, the central bank hiked rates by 0.75 percentage point, and some economists on Wall Street expect the Fed to hike by as much as a full point later in July.
Inflation has also had massive political ramifications in the U.S.
According to a poll conducted by the Pew Research Center, President Joe Biden’s approval rating has slumped to 37% — with a majority of Americans saying his policies have made the economy worse. Pew also found that just 13% of Americans rate U.S. economic conditions as “excellent/good.”
Dimon’s remarks follow comments he made last month in which he warned investors to brace themselves for an economic “hurricane.”