JPMorgan CEO and crypto critic Jamie Dimon is issuing a warning on inflation and a potential incoming economic crisis.
In Dimon’s latest annual letter to JPMorgan’s shareholders, he says that the US’ largest bank is prepared for potentially higher interest rates, and higher and longer-lasting inflation.
Dimon says that assets across the board, including crypto and “meme stocks” are about to face the consequences of more than a decade of quantitative easing (QE) and the rapid expansion of the money supply.
“This period of QE also led to extraordinary liquidity (and a surging money supply) that undoubtedly drove increased prices across many investment classes – from stocks and bonds to crypto, meme stocks and real estate, among others. Importantly, this also increased bank deposits from $13 trillion to $18 trillion (and the now-famous uninsured deposits from $6 trillion to $8 trillion).
QE is now being reversed into quantitative tightening (QT) as the Fed grapples with inflation.”
The banker says that investors expecting a pivot from the Federal Reserve may have to instead brace for rates to go a lot higher than anyone expects as the economy goes into a 1970s or 1980s-style recession.
“If we have higher inflation for longer, the Fed may be forced to increase rates higher than people expect despite the recent bank crisis. Also, QT (quantitative tightening) may have ongoing impacts that might, over time, be another force, pushing longer-term rates higher than currently envisioned. This may occur even if we have a mild – or not-so-mild – recession, as we saw in the 1970s and 1980s.”
Some crypto insiders have opposing views to Dimon’s. Former Goldman Sachs executive and macro investor Raoul Pal has been calling for a Fed pivot since late last year.
ARK Invest’s Cathie Wood has predicted that once the Fed does pivot, Bitcoin (BTC) and blockchain technology will come out ahead as the best-performing risk assets.
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