by Simon Black, Sovereign Man:
The most powerful banker in the world, JPMorgan Chase CEO Jamie Dimon, just released his annual letter to shareholders.
Behind Warren Buffett’s annual missive, Dimon’s letter is probably the most read and deliberated executive report out there.
For one, Dimon is one of the most connected and respected men in finance.
And given his bank’s massive size (it earned $24.4 billion on $103.6 billion in revenue last year) and reach (it’s a giant in consumer/commercial banking, investment banking and wealth management), Dimon has incredible visibility and intel on what’s going on around the world.
This year Dimon used a large chunk of his 46-page letter to share his thoughts on government and public policy, saying it’s hard to look at the last 20 years in America “and not think that it has been getting increasingly worse.”
And if you’d like to hear how Dimon suggests we fix regulation, immigration, taxation, infrastructure, education and every other problem in America today, it’s all in there.
I’m not really interested in his political views. Dimon runs one of the biggest banks in the world, so I’m much more interested in his insights into the economy and financial markets.
Fortunately, Dimon didn’t waste all of his letter on politics.
He says the US economy seems healthy today and he’s bullish for the “next year or so.”
He sees lower unemployment, higher capital spending, wage growth, low housing supply and “relatively strong” consumer and corporate credit aiding growth.
Well, it’s easy to have rose-colored lenses when your profits come from lending money… because there’s more debt in the world today than ever before.
Both corporations and consumers are sitting on a record amount of debt. And as I pointed out earlier this week, the fastest growing bank asset last year was subprime loans… meaning that the quality of debt is getting worse and worse.
Then there’s the US government, whose debts just passed $21 trillion for the first time in history.
And they’re projecting adding another trillion dollars of debt each year into the foreseeable future.
Later in his letter, Dimon admits that the US is facing some serious economic headwinds today.
For one, he’s concerned the unwinding of quantitative easing (QE) could have unintended consequences.
Remember- QE is just a fancy name for the trillions of dollars that the Federal Reserve conjured out of thin air.
According to Dimon [my emphasis added]:
Since QE has never been done on this scale and we don’t completely know the myriad effects it has had on asset prices, confidence, capital expenditures and other factors, we cannot possibly know all of the effects of its reversal.
We have to deal with the possibility that at one point, the Federal Reserve and other central banks may have to take more drastic action than they currently anticipate – reacting to the markets, not guiding the markets.