Billionaire Jamie Dimon Worries Federal Spending Could Trigger High Inflation, Urges Businesses To Help Government Curb Inequality

Topline

In a conference call Friday morning, Jamie Dimon, the billionaire chairman and CEO of JPMorgan Chase, warned the economic recovery is far from over and urged businesses to help the federal government ward off increasing wealth inequality amid heightened inflationary concerns as he discussed the bank’s record fourth-quarter earnings.

Key Facts

“Inequality is a real problem,” Dimon said, noting that 40% of Americans make below $15 per hour and pointing to JPMorgan’s own client base that includes high-earners who have, for the most part, done well during the pandemic–keeping their jobs and seeing home values and savings increase.

“For the lower quartile of earners, it’s been the opposite,” he added, noting that of the 12 million stimulus checks JPMorgan processed last quarter, many going to people with low account balances were quickly withdrawn–a sign relief was “obviously needed,” Dimon said.

The $900 billion stimulus signed into law last month has bolstered JPMorgan’s outlook, the firm’s CFO said, but uncertainty remains in the next three to six months as the vaccine rollout aims to meet ambitious inoculation goals while cases continue to surge and consumer confidence remains low compared to pre-Covid levels.

At the same time, Dimon warned problematic inflation remains a possibility in light of the massive fiscal stimulus federal governments have authorized in addition to central banks pumping some $12 trillion into the global economy. 

“You’ve got to consider the scenario where we have higher inflation–and not 2%,” Dimon said, referring to the Federal Reserve’s longtime annual inflation target, adding: “That would be great, like Goldilocks great–but no, I mean 3% or 4%.”

“That’s not the end of the world,” he added, though other experts have warned price spikes could be much more severe once the pandemic subsides in light of pent-up consumer demand and savings among high-earners in particular.

News Peg

JPMorgan Chase, the nation’s largest bank by assets, revved up earnings season Friday morning with results that shattered Wall Street expectations. The bank posted net income of $12.1 billion in the fourth quarter, surging nearly 50% in just one year and marking its best quarterly profit ever, thanks in large part to the release of $2.1 billion in cash reserves, reflecting optimism over an impending economic recovery.

Crucial Quote 

“With all the things that took place after the Civil Rights Movement, we just haven’t made the progress that we should…  in particular, with the Black community who’s been left behind,” Dimon said. “It’s time to get our act together, and business has to work in collaboration with governments to do it. I just don’t think it’s going to happen with good government alone. It’s not going to happen just by yelling at people. The successful companies did not create the slums, but they can help fix them.”

Big Number

$30 billion. That’s how much JPMorgan has committed to combat wealth inequality in the United States over the next five years. On the call Friday, Dimon said the money is being used to finance 8 million mortgages in lower-income neighborhoods and to create lending institutions serving low-income residents. 

Tangent

In an interview Thursday afternoon, Federal Reserve Chairman Jerome Powell warned of short-lived price spikes spurred by “a strong wave of exuberant spending” once the pandemic subsidies. But he also sought to assuage fears of long-term inflation, insisting the economy is on track for pre-pandemic growth levels and a broad economic recovery by year’s end.

Further Reading

JPMorgan Posts Record $12.1 Billion Profit–Shattering Expectations Despite Pandemic Highs (Forbes)

Dow Falls 200 Points As Wall Street Worries Over ‘Opposition’ To Biden’s $1.9 Trillion Stimulus Plan–And Higher Taxes (Forbes)

Fed Chair Powell Warns Of ‘Exuberant’ Spending And Price Spikes After Pandemic But Isn’t Worried About Long-Term Inflation (Forbes)

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