Jamie Dimon expects consumer to push economy through current bumps towards growth
Supply chain issues and the delta variant of the coronavirus have held back the economic recovery, but U.S. consumer strength is expected to help the current rebound continue into 2022, JPMorgan Chase CEO Jamie Dimon said on Monday.
“I would be optimistic about next year because we’re going to hit a more normal economy,” Dimon said in a 30-minute interview with the Institute of International Finance. Nervousness around the highly transmissible delta variant and supply chain disruptions may be only temporary, he said.
Dimon and Citigroup Chairman John Dugan discussed topics such as central bank policy, inflation, cryptocurrency, and banking industry performance during the COVID-19 lockdown.
JPMorgan sees some early signs of loan growth, particularly in auto loans, but the economy may be at an inflection point with inflation.
“The amount of fiscal stimulus globally was extraordinary – it’s hard to say they won’t have an inflationary effect,” Dimon said. The stock market has already factored in 10-year Treasury interest rates of around 3.5%, but not up to 5%, he said. As of the last check, the 10-year Treasury yield was around 1.6% on Friday, with the bond market closed Monday for the Indigenous Peoples’ Day / Columbus Day.
Banking regulations regarding statutory liquidity ratios (SLR) and liquidity coverage ratios (LCR) should be reassessed as these size constraints limited the ability of banks to lend money during the year’s COVID lockdown. last, said Dimon.
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Dimon, who met with President Joe Biden last week, called on lawmakers to move past the debt ceiling debate and pass an infrastructure measure. The country will more easily solve debt problems with economic expansion, just as it did after World War II.
“If you’re a policy maker, growth, growth, growth is what matters,” Dimon said.
Policymakers should first ask what makes sense to help the country, not what will help their clients, said Dimon, who added that he plans to write a column on the topic.
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Dimon and Dugan both said cryptocurrencies would most likely be regulated at some point, in the vein of traditional sources of capital. Banks have helped clients transact cryptocurrency on individual accounts, but do not hold any of these assets on their balance sheets.
“It’s increasingly becoming a reality,” Dugan said of bitcoin and other currencies.
Dugan and Dimon both support the role of banks in tackling climate change. Dugan said he did not support the link between bank capital requirements and climate change-related activities, but said a better way to address the issue was to revise the language of risk of loss.
“Climate change presents some downside risks for the bank, although they are not easy to quantify or determine,” he said.
For his part, Dimon reiterated his support for a carbon tax as an incentive to help reduce emissions. “We think we should focus on the climate, it’s not about hugging trees,” Dimon said.
Thinking back to the impact of COVID, Dugan said banks were better prepared for this more recent crisis in part thanks to the changes put in place following the 2008 global financial crisis.
“The banks were in a good position and were much more able to lean on the economy by dramatically increasing their lending activity when it was needed most,” said Dugan. “Because of their increased strength, the banks were a key part of the solution instead of being a key part of the problem as they were in 2008.”