Dimon warned that the world faced a “dangerous cocktail” of risks that could be “explosive” for the global economy. Photo: CHRIS RATCLIFFE/Shutterstock
The chief executive of the world's largest bank compared the $9 trillion wave of cash unleashed during the pandemic to heroin, suggesting the US economy is addicted to debt.
Jamie Dimon, the chief executive of JP Morgan, warned that the world now faces a “dangerous cocktail” of risks that could prove “explosive” to the global economy.
Although Mr Dimon described the world’s largest economy as being on the cutting edge innovation, he added: “We're spending a lot of money right now.”
Referring to the trillions of dollars in stimulus checks given to Americans during the shutdown and the $4 trillion printed by the US Federal Reserve to buy bonds, he said, “This money is like heroin.
“And of course, when you put $5 trillion into the hands of consumers… think of it as drugs in the system… Well, of course you'll feel pretty good. Of course stock markets are high and of course companies are making more money.»
Mr Dimon, who recently warned of «the most dangerous time the world has seen in decades», suggested that companies could face a big drop in profits as the economy returns to a world not buoyed by government handouts or cheap money.
Mr. Dimon also warned that Israel's war with Hamas and the ongoing conflict in Ukraine are exacerbating a host of risks facing a more fragile global economy.
“You can't sit here and say something bad might not happen. I'm not trying to scare people, I'm more in the category that things can go wrong,” he said at the Global Investment Summit organized by Rishi Sunak in London.
He warned that inflation, will likely remain high for a long time, partly due to the move towards net zero and higher government spending.
“We're on such a sugar high, and I'm not saying it's will end badly. depression, [but] I think there are more inflationary forces.
“Rates are more likely to rise, inflation is not going to go away, and all of that is going to cause more problems of one kind or another.”
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Despite the pessimism, Mr Dimon praised the UK economy for its innovation , entrepreneurship and pro-growth policies, and said he would «take notes and send them back to the US administration,» adding «fun talk» about the US economy. had to be taken in the context of huge government spending.
But in comments that threatened to overshadow the Prime Minister's promises at the summit that he would «fix» Britain's problems with tax cuts, Andrew Bailey, governor of the Bank of England, expressed concern about the UK's future prospects.
In Interviewed by The Chronicle in Newcastle, Mr Bailey said: «If you look at what I call the potential growth rate of the economy, there is no doubt that it is lower than it has been for most of my working life.»
Sunak warned that the outlook for the global economy was «more uncertain and more challenging than at any time in recent history» as he admitted UK growth was too low.
«We want it to be higher » he told an audience of bankers and investors, including Mr Bailey, at Hampton Court Palace in London.
The Prime Minister said that «much» of the productivity gap between the UK and fast-growing G7 economies such as the US could be explained by «the lower business investment that has characterized the UK economy for decades».
Mr Sunak insisted he is “taking steps to fix this”, highlighting the latest week-long move to make tax breaks for flagship businesses permanent.
“Make no mistake, we are cutting taxes,” he said in his opening speech.
With the general election approaching and the Tories' fight over immigration setting the backdrop for the summit, it was also revealed that the Labor Party had organized the breakfast on the morning of the event, which was attended by nearly three dozen business leaders, including several British CEOs.
< p>Stephen Schwarzman, chief executive of private equity giant Blackstone, praised the UK's «pro-business» stance, adding that the company was exploring opportunities in data centers and student accommodation across Europe, and described the UK as one of the few places seeing economic growth. «held on» despite uncertainty.
He also criticized US President Joe Biden's debt-fueled Inflation Reduction Act (IRA), which offers hundreds of billions in subsidies for green investments in the world's largest economy.
Mr Schwarzman said: “We currently have a deficit of $2 trillion (£1.6 trillion) a year. I'm not sure it's a model that everyone will use and replicate.
“I don't know if I would recommend it to the UK.”
Analysts at S& P Global has warned that the UK faces another year of «stagflation» as high interest rates designed to bring inflation under control hold back growth.
Inflation has now fallen from a peak of 11.1% in October . in 2022 to 4.6% last month, as falling energy prices pushed the headline rate down from 6.7% in September.
Financial markets are betting the first rate cut to 5% will happen in the summer. 2024
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