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JPMorgan Chase CEO warns 'extraordinary' government spending will lead to severe economic consequences
At the AllianceBernstein Strategic Solutions Conference, JPMorgan Chase CEO Jamie Dimon said he's willing to bet that unchecked government spending will end in stagflation, a term that refers to a frightening combination of high inflation, high unemployment and low economic growth, Fortune reports.
“I look at the amount of fiscal and monetary stimulus that has been undertaken over the last five years. It was so unusual. How can you tell me that this won't lead to stagflation?
Probably no. But I, for one, am quite ready for this.”
A week ago at the banking giant's Global Summit in Shanghai, Dimon told CNBC that he thinks the Federal Reserve may not be done raising rates just yet.
“I think inflation is more resilient than people think. I think the chances are better than others think, mainly because there is a huge amount of fiscal stimulus still in the system and could still contribute to some of that liquidity...
I look at the range of results and again I realize that the worst outcome for all of us is what you call stagflation, rate hikes and recession. This means corporate profits will decline and we will get through it.”
Dimon's economic outlook echoes a warning made several months ago by JPMorgan chief market strategist Marko Kolanovic.
“We believe there is a risk of the narrative turning from Goldilocks to something like the stagflation of the 1970s, which would have serious implications for asset allocation...
"Investors should keep an open mind that there is a scenario in which rates should remain high for a long time and the Fed may have to tighten financial conditions."
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