Jamie Dimon, president of JP Morgan Chase, recently argued that the world is facing severe complications such as high inflation, especially in energy and food; added to the rise in interest rates.
The banker —who has managed one of the most solid institutions in the world for 17 years— maintains that “Things can go much worse”, given that it was thought that “economic problems were temporary and they are not”.
He also argued that the United States is likely to enter a recession before the end of the year, since it is still unknown how much interest rates will continue to rise.
It is worth emphasizing that the Federal Reserve (Fed) aggressively raised its interest rate to 1.75% in a context of high inflation with maximums of 8.6%, an indicator that exceeds what has been seen in 30 years.
Dimon pointed out that it is close to peaking – in reference to inflation – and then prices could start to fall, but he stresses that it is difficult to make forecasts.
“In recent years, the largest monetary and fiscal stimulus that the world has seen in its history has been injected. It is complex to guess the short-term consequences of these policies. What does seem to be clearer is that inflation is not transitory. Wages are going up, house prices are too“, I note.
Along these lines, he acknowledged that central banks have contributed to inflation skyrocketing, but “it has not been on purpose.”
“I have always thought that zero interest rate policy was a bad idea. It has many detrimental effects. On the other hand, the purchase of public debt has clear inflationary effects, much more than a simple quantitative easing program (quantitative expansion, translated into Spanish)”, he explained.
War is an opportunity to switch to renewable energy
Dimon considers that the war between Russia and Ukraine represents a new opportunity to unite the Western world, since it does not put global security on the table, but energy and food security.
In his opinion, the best transition is to replace coal with gas, despite the fact that some countries are turning to coal because they cannot afford the high prices of hydrocarbons.
“The United States should be more ambitious in its oil and gas production, particularly to help Europe during this time of energy insecurity,” he concluded.