Speaking at the APEC CEO Summit in Lima, Peru, on Nov. 14, Dimon criticized the regulatory environment for hindering lending, highlighting stringent capital requirements introduced after the financial crisis of 2008–09 that have forced banks to reduce their loan-to-deposit ratios.

“A lot of bankers, they’re, like, dancing in the street because they’ve had successive years and years of regulations, a lot of which stymied credit,” the JPMorgan chief said, according to a Bloomberg video of his remarks at the summit. “You could have kept the banks equally safe but had them do more credit.”

He noted that banks now lend only $65 for every $100 in deposits, compared to $100 previously, which he said stifles economic growth.

Dimon suggested that these regulations, while well-intentioned, have become a headwind for the economy.

“And if that’s what you want, if for some reason the regulators think they’re geniuses and that’s the best way to run the banking system, so be it,” Dimon said, adding that he believes it is possible to maintain financial stability without hindering lending.

Deregulation, he said, could benefit industries beyond banking. Dimon pointed to the slow permitting process for rare-earth mining in the United States as another example of regulatory inefficiency hampering economic growth.

“Ten years—they haven’t got their permits yet,” he said of companies seeking to extract critical minerals crucial for technology and defense industries. “It’s a shame. And we’re doing this to ourselves, and it’s a mistake.”

Dimon also praised President-elect Donald Trump’s proposal for a new Department of Government Efficiency (DOGE), which aims to streamline bureaucracy.

“You could talk to any industry and they’ll give you examples of regulation that could be reduced to make it easier for them to do business while keeping the country safe,” he said.

When asked about the market’s strong reaction to Trump’s election victory, Dimon said it reflects optimism for a “pro-growth shock” as businesses prepare to make aggressive capital investments.

“You’ve already seen the markets have responded quite well,” he noted. “And I think America needs a growth strategy, so I literally applaud that,” he said.

Dimon emphasized that the agenda should go beyond slashing red tape to include broader reforms like improving the efficiency of the permitting process. “Collaboration between government and business is the way to have growth,” he said.

While the Trump administration appears poised to pursue a deregulatory agenda, the administration of President Joe Biden has emphasized consumer protections and systemic risk management.

Under the Biden administration, for example, the Consumer Financial Protection Bureau (CFPB) has seen a significant restoration of its authority, reversing the more hands-off approach taken during Trump’s first term. Since 2021, the CFPB has ramped up its oversight, launching investigations and enforcement actions against financial institutions accused of engaging in predatory lending, discriminatory practices, or misleading marketing. It has also cracked down on banks for practices such as “junk fees,” unauthorized account openings, and withholding of credit card rewards.

Also, during Biden’s term, U.S. banking regulators have focused more heavily on addressing systemic risks in the financial system, with a particular emphasis on implementing the final phase of Basel III reforms, often referred to as the “Basel III endgame.”

These reforms, developed in the wake of the 2008 financial crisis, aim to bolster the resilience of the banking sector by increasing capital requirements, enhancing risk-weighting measures, and introducing stricter leverage ratios.

Critics, including Dimon, have said that the stricter rules would not have prevented past bank failures and could have a negative impact on the economy.

I respect Jamie Dimon, of JPMorgan Chase, greatly, but he will not be invited to be a part of the Trump Administration. I thank Jamie for his outstanding service to our Country!

The leader of one of the world’s largest private banks has been floated as participating in Trump’s second term in the White House, but Trump shut down those rumors with his post.

According to Fox Business:

Trump has been critical of Dimon in the past, most recently last year, when he referred to the JPMorgan boss as a “Highly overrated Globalist” on his Truth Social platform.

Over the summer, the former president told Bloomberg he would consider Dimon to serve as Treasury secretary if he wins a second term in the White House, before walking back those comments a week later.

Dimon condemned the Jan. 6, 2021, attack on the U.S. Capitol by Trump supporters, but he also recently praised some of Trump’s positions and policies.

During the GOP primaries, Dimon backed former U.S. Ambassador to the United Nations Nikki Haley.

Amazon’s Jeff Bezos, JPMorgan’s Jamie Dimon, and Meta’s Mark Zuckerberg have all sold big chunks of shares in their own companies. How come?

Bezos is way out in front after offloading 50 million shares of Amazon in just nine trading days this month, pocketing an estimated $8.5 billion.

Zuckerberg cashed in almost 1.8 million shares of his social-media empire for more than $400 million in the last two months of 2023.

JPMorgan’s Dimon joined the club this month, jettisoning about 822,000 shares of the bank he leads for about $150 million.

If these men believe that the U.S. economy is going to thrive and their companies will continue to grow, it would make sense to just sit back and let their portfolios increase in value.

But instead they have all determined that this is a perfect time to sell.

And I can definitely understand that.  Over the past year, the stocks of all three companies have soared to unprecedented heights…

Meta stock has soared by 186% over the past year, JPMorgan is up nearly 30%, and Amazon has surged close to 90%. All three companies are trading close to record highs.

These men didn’t become filthy rich by being stupid, and selling at the peak of the bubble certainly wouldn’t be stupid.

But is that the only reason why these billionaires are feverishly liquidating shares?

In recent weeks, much has been made of the fact that Zuckerberg and his wife are constructing an absolutely massive survivalist compound in Hawaii.  The following comes from Time Magazine…

Meta CEO Mark Zuckerberg and his wife Priscilla Chan, co-founder and co-CEO of the Chan Zuckerberg Initiative, plan to build a 5,000-square-foot underground shelter on their Hawaii ranch with its own energy and food supplies, according to a Wired investigation published earlier this month.

The plan is that the shelter’s door will be made of metal and filled in with concrete—common in bunkers and bomb shelters, the news outlet reported in its extensive article citing planning documents and interviews.

So why is Zuckerberg going to such effort?

Does he know something that the rest of us do not?

Yes, it is true that Zuckerberg has always been more than a little bit eccentric.

But many other ultra-wealthy individuals are also preparing for doom.  In fact, Sam Altman and Peter Thiel both seem to be extremely alarmed about the times that are approaching…

To keep himself safe, Altman keeps a stash of the usual Doomsday prepper fare including antibiotics and water as well as some more unusual goods. He told the founders of the startup Shypmate, per the New Yorker: “I try not to think about it too much. But I have guns, gold, potassium iodide, antibiotics, batteries, water, gas masks from the Israeli Defence Force, and a big patch of land in Big Sur I can fly to.”

He also said he and PayPal co-founder Peter Thiel have an “arrangement” to flee to one of Thiel’s luxury properties in New Zealand in the event the End of the World comes about.

Why would Sam Altman need guns and gas masks?

And why would he need potassium iodide?

Exactly what does he expect to happen?

Other billionaires are going to even greater extremes.

Al Corbi, the founder and president of Strategically Armored & Fortified Environments, says that he is currently working on an “island fortress” for one client that will have a very deep moat around it filled with highly flammable liquid…

Corbi — who worked on the palatial 27-floor, $4.8 billion Mumbai residence of business mogul Mukesh Ambani of Reliance Industries — reveals to THR that his most spectacular project, due to be completed in 2025, is an island fortress created on a 200-acre property in the U.S., with cutting-edge tactical systems.

“The shelter can withstand a blast one mile from ground zero,” says Corbi. “But that was almost incidental. The client [a business mogul] was saying, ‘I want to make sure that no one can get to my family,’ so we wound up literally building a 30-foot-deep lake [around the compound] skimmed with a lighter-than-water flammable liquid that can transform into a ring of fire. The only access to the island is a swing bridge.”

I have to admit, that sounds pretty cool.

I just hope that they have figured out how to keep the fire from escaping the moat.

The property will also have “water cannons that can take down parachuters”…

Also at Corbi’s project, “there are water cannons that can take down parachuters, Apache helicopters, whatever’s coming your way 500 feet in the air,” he says. “Then we took all the dirt removed for the lake to literally build a mountain as natural fortification around the property. And we cut a tunnel through with flame-throwers, gassing systems, a steel wall that closes midway that could stop a 16-wheeler going 80 miles an hour, and bollards at both ends.”

Okay, so I have a question.

Why go to so much trouble?

If life is going to continue more or less like it has for the past few decades, why waste so much money?

Obviously the client that is paying for this island fortress is envisioning that the world is going to go mad.

And I agree with that assessment.

In fact, I believe that the most chaotic chapters in all of human history are ahead of us.

The billionaires that I have discussed in this article would not see eye to eye with me on all of the specifics, but they are certainly preparing for apocalyptic times too.

What about you?

Have you been getting prepared for what is coming?

I hope so, because the clock is ticking…

Michael’s new book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

Mr. Dimon made the remarks while speaking on a panel at the Bipartisan Policy Center in Washington last week alongside former House Speaker Paul Ryan (R-Wis.), a self-proclaimed deficit hawk.

At one point in the discussion, Mr. Ryan said that the “most predictable crisis we’ve ever had” is the looming debt spiral as the U.S. government faces increasing levels of indebtedness, threatening America’s ability to pay it back—and risking a default.

Mr. Dimon, who agreed with Mr. Ryan’s take, was asked what it means for the U.S. economy if the federal government fails to tackle the issue of massive government spending.

He recalled that in the early 1980s, the debt was around 35 percent of gross domestic product (GDP). Today, the debt-to-GDP ratio is above 100 percent, and Mr. Dimon said it’s projected to reach 130 percent by 2035.

“It’s a hockey stick,” Mr. Dimon said of his prediction for the future path of the debt-to-GDP ratio, applying a term often used to describe a chart pattern showing plotted values moving more or less sideways—before they suddenly spike and vault skyward.

‘There Will Be a Rebellion’

While the United States has not yet suffered the “hockey stick” surge, Mr. Dimon warned that “when it starts, markets around the world—by the way, because foreigners own $7 trillion of U.S. government debt—there will be a rebellion.”

The bank chief added that a “rebellion”-type reckoning—which could involve a sudden deepening of the debt crisis as investors lose confidence in the government’s ability to service its debts and sell off U.S. Treasurys—would be “the worst possible way to do it.”

The point at which America’s public debt becomes unsustainable is fast approaching, Mr. Dimon warned.

“It is a cliff. We see the cliff. It’s about 10 years out. We’re going 60 miles an hour,” he said.

Analysts at the University of Pennsylvania estimate that when the debt-to-GDP ratio hits around 200 percent, it will hit the point of no return—when no amount of future tax increases or spending cuts could prevent the government from defaulting on its debt.

“Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the U.S. and world economies,” they explained.

Under a “best case” scenario, the University of Pennsylvania analysts estimate that the United States has around 20 years to take corrective action before the growing debt spiral spins out of control.

However, a “worst case” scenario is possible, too. This would be prompted in part by forward-looking markets losing confidence in the U.S. government and demanding an even higher return on U.S. government securities if they see debt increasing well into the future.

The higher borrowing rates that would ensue would, in turn, make the debt snowball or grow even faster. The analysts warn that, under a worst-case scenario, the U.S. debt-to-GDP ratio could rocket to 204 percent by 2040.

By contrast, the Congressional Budget Office (CBO) estimates in its base case that the debt-to-GDP ratio will reach around 134 percent by 2040 and 181 percent by 2053.

Debt ‘Death Spiral’

Echoing Mr. Dimon’s warning of a fast-approaching reckoning for America’s ballooning public debt, author Nassim Taleb said he sees the United States heading for a debt “death spiral.”

Unless politicians in Washington rein in spending, debt troubles will snowball, warned the author of the bestselling book “The Black Swan,” which deals with the extreme impact of rare events.

Mr. Taleb, who correctly predicted the 2008 financial crash, issued his latest warning on Jan. 29 while speaking at an event for Universa Investments, the hedge fund he advises.

“So long as you have Congress keep extending the debt limit and doing deals because they’re afraid of the consequences of doing the right thing, that’s the political structure of the political system, eventually you’re going to have a debt spiral,” Mr. Taleb said at the event.

“And a debt spiral is like a death spiral,” he added ominously. While he didn’t elaborate on how he thinks this could play out, he expressed pessimism that politicians would smarten up.

“We need something to come in from the outside, or maybe some kind of miracle,” he added.

Mr. Dimon’s warning of a “rebellion” and Mr. Taleb’s remarks about a “death spiral” comes as the U.S. government added around $2.65 trillion to America’s national debt in 2023, topping a total of $34 trillion for the first time ever.

This is “truly a depressing ‘achievement,’” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB).

“Though our level of debt is dangerous for both our economy and for national security, America just cannot stop borrowing,” she said in a statement. “There is not a single economic reason to add to the debt at the rate we are, but sadly, our political leaders are unwilling to make the changes we need to turn the fiscal situation around.”

Image by Steve Jurvetson via Flickr, CC BY 2.0 DEED.

Nikki Haley is a brunette Liz Cheney.

She hates free speech as much as she loves war and foreign aid.

Nikki Haley is a brunette Liz Cheney.

She hates free speech as much as she loves war and foreign aid.

— Thomas Massie (@RepThomasMassie) December 18, 2023

Massie, a strong supporter of Ron DeSantis, was able to highlight in two short sentences why Haley would be a horrible choice as the GOP nominee or even as president.

What he didn’t note were some of Haley’s other huge red flags. Her sudden anointment by the RINO mega-donor cabal has been sudden and absolute. And it’s not just the shrinking Republican field that has them consolidating. Haley has been able to bring in “new” donors from outside traditional Republican donor circles, including JPMorgan Chase CEO Jamie Dimon and BlackRock CEO Larry Fink. Both have lured other Wall Street crony capitalists into her camp?

What did they ask from her during recent meetings? More importantly, what did she promise them?

Mr. Dimon made the remarks while reporting JPMorgan’s third-quarter results, which showed America’s biggest bank by assets generating net income of $13.2 billion.

After boasting that his bank had $3.2 trillion in assets and a return on average tangible common shareholders’ equity (ROTCE) of 22 percent in the third quarter, Mr. Dimon turned his attention to the broader economy—and the headwinds it faces.

While warning of clouds on the horizon of consumer spending, “extremely” high government debt levels, and the largest peacetime fiscal deficits in U.S. history, Mr. Dimon said he sees a growing risk that inflation stays high and that the Fed will raise interest rates even higher.

He then mentioned the disruptive impact of the war in Ukraine and the recent terror attacks in Israel, warning of “far-reaching impacts on energy and food markets, global trade, and geopolitical relationships.”

“This may be the most dangerous time the world has seen in decades,” he cautioned.

Economic Headwinds

One area Mr. Dimon focused on was the waning strength of American consumers and their key contribution their spending makes to the U.S. economy.

“Currently, U.S. consumers and businesses generally remain healthy, although, consumers are spending down their excess cash buffers,” he said.

Consumer spending is a key barometer of economic health in the United States as it accounts for roughly two-thirds of gross domestic product (GDP). This means that if the all-mighty U.S. consumer taps out, the economy is likely not far behind.

His warning about excess savings being depleted comes as the Federal Reserve Bank of New York revealed on Oct. 11 that Americans’ disposable income has fallen and consumers are increasingly dipping into the savings to prop up consumption.

From the beginning of the pandemic in 2020 through the end of 2021, Americans’ excess savings grew to roughly $2.6 trillion, or 14 percent of annual disposable income, according to the New York Fed.

Since then, U.S. excess savings has steadily fallen, dropping to 10 percent of disposable income—or $1.9 trillion—by the second quarter of 2023.

Data for the first two months of the third quarter cited by the New York Fed show that consumers have generally maintained their propensity to spend but, as real disposable income has fallen, they’ve increasingly been drawing on their savings to continue shopping.

The latest government data on consumer spending is for August, and it shows personal consumption expenditures (PCE) slowing down in recent months. Spending grew 0.4 percent in August, less than half of July’s pace of 0.9 percent.

But clouds seem to building on the horizon. A recent survey carried out in September by CNBC-Morning Consult found that 92 percent of U.S. adults have cut back on spending over the past six months. What’s more, over three-quarters of those polled said they plan to cut back on spending for nonessential items in the future.

All this has a growing number of economists and business leaders worried that the U.S. consumer may be reaching a breaking point.

For example, former Walmart CEO Bill Simon told CNBC in a recent interview that a series of factors—political polarization, inflation, and high interest rates—were all working together to undermine consumers and their propensity to spend.

“That sort of pileup wears on the consumer and makes them wary,” Mr. Simon told the outlet. “For the first time in a long time, there’s a reason for the consumer to pause.”

Concerns about inflation rearing its ugly head are on the rise, as well.

Inflation Eroding Living Standards

Nearly 50 percent of Americans say high prices are eroding their living standards—a record number that matched the all-time high set in July 2022, when the pace of inflation was a whisker away from breaking into the double digits.

“After stabilizing earlier this year, concerns about inflation have grown again,” reads the latest University of Michigan Surveys of Consumers report, released on Oct. 13.

The survey shows that 49 percent of consumers polled in early October said high prices were eroding their living standards. That’s up substantially from last month’s 39 percent and matches the all-time high notched in July 2022.

Inflation, as measured by the Consumer Price Index (CPI), shot up at a furious pace through 2021 and narrowly missed breaking the 10 percent psychological barrier by mid-2022.

The pace of rising prices hit a recent peak of 9 percent in June 2022, a multi-decade high that later fell to 3.1 percent by June 2023. However, inflation in August and September jumped back up to 3.7 percent—bringing with it renewed concerns about inflation.

What’s more, year-ahead inflation expectations have jumped, rising from 3.2 percent in September to 3.8 percent in early October, per the University of Michigan survey.

This, in turn, has led to a sharp drop in consumer confidence.

The University of Michigan survey showed that overall consumer sentiment plunged 7 percent in October, after two months of relatively little change.

“Assessments of personal finances declined about 15 percent, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19 percent,” said University of Michigan Surveys of Consumers Director Joanne Hsu, in a statement.

Other reports, including from The Conference Board and the New York Fed, show consumer strength and optimism waning, threatening to put a damper on the economy.

Mr. Dimon made the remarks at the Barclays Global Financial Services Conference on Sept. 11, at which he warned of a number of risks to the economy, including the Ukraine war, monetary tightening by the Federal Reserve, and increasing reliance on government spending.

“To say the consumer is strong today, meaning you are going to have a booming environment for years, is a huge mistake,” he said.

The booming economy narrative rose to prominence in recent months, driven by strong retail sales and wage growth, while recession fears have eased. But there are signs that the recent rise in consumer sentiment has been short-lived and that the economy is facing some headwinds.

Consumer Strength Weakening?

Consumer spending, which represents roughly 70 percent of U.S. gross domestic product, posted solid growth in July, the latest month of available data. However, economists widely expect the past year of aggressive Fed interest rate hikes to weigh more heavily on domestic demand.

The latest data on retail sales showed that Americans spent more than expected in July, splurging on hobbies, sporting goods, and clothing, prompting economists at Goldman Sachs to raise their third-quarter gross domestic product estimate by seven-tenths of a percentage point to a 2.2 percent annualized rate.

However, there are signs that the boom may not last as the latest consumer tracker for August from Deloitte says that financial well-being sentiment has stagnated, with the percentage of consumers worried about savings and postponing big purchases on the rise, while spending intentions “remain on a long-term downtrend.”

A separate barometer of consumer confidence from the Conference Board found that, after a sharp uptick in July, its gauge retreated to a reading “a hair above 80—the level that historically signals a recession within the next year.”

While financial markets have, over the summer, largely dismissed recession fears, fresh data suggests that the country may be facing a “stagnation” point.

“A near-stalling of business activity in August raises doubts over the strength of U.S. economic growth in the third quarter,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a report that showed new orders tumbling, input cost inflation rising, and the pace of job creation slowing.

Mr. Dimon’s remarks at Monday’s conference tapped into this sentiment, with the JPMorgan chief saying that the health of U.S. consumers and businesses was still “pretty good,” although he warned against being overconfident.

Key concerns that he mentioned were the twin factors of central bank efforts to roll back easy money policies—which have pushed inflation to multi-decade highs—and governments “spending like drunken sailors.”

“I think there’s a false sense of security that those two things will end up being OK. I don’t know,” he said.

Higher Capital Requirements

At the conference, Mr. Dimon also took aim at the higher capital requirements U.S. regulators have proposed for banks, warning that such measures could starve the economy of credit and amount to another hurdle to growth.

“I wouldn’t be a big buyer of a bank,” he said, drawing laughter from the audience, while calling the new proposal “hugely disappointing.”

Mr. Dimon, who heads America’s biggest lender, questioned what regulators were trying to accomplish by proposing the new rules, which would require bigger U.S. banks, with total assets of $100 billion or more, to set aside billions of dollars to bolster their ability to absorb losses when times get tough.

“All I want is fairness, transparency, openness,” Mr. Dimon said with regards to the regulatory proposal, which would require banks with total assets of $100 billion or more to maintain an additional 2 percentage points in capital above current levels.

The regulatory proposal has been roundly criticised by the banking industry, with Bank Policy Institute (BPI) President and CEO Greg Baer warning of “higher costs to consumers and greater instability for markets,” in a statement obtained by The Epoch Times.

Mr. Dimon said that the new regulatory proposal would require JPMorgan to hold 30 percent more in capital than a European lender, which he said was an unfair burden on U.S. banks.

In contrast to Mr. Dimon’s take on tougher bank capital rules, some U.S. regulators have said the proposal doesn’t go far enough.

Minneapolis Federal Reserve President Neel Kashkari recently said he expects more government regulation of the banking sector in light of several high-profile bank failures.

Mr. Kashkari also said that he’d like to see the proposed capital requirement rules apply to smaller institutions with less than $100 billion in total assets, though he didn’t specify what threshold he had in mind.

At Monday’s conference, Mr. Dimon also said he believes that the Chinese market is no longer as attractive to foreign investors as it once was.

“In terms of our own business, the risk-reward [from China], which was very good, has now become okay. The risk is bad,” he said, adding that JPMorgan has become more cautious about managing its risk.

Caution has also entered the homebuyer market in the United States, with mortgage applications dropping last week to their lowest point since 1996.

Reuters contributed to this report. Article cross-posted from our premium news partners at The Epoch Times.

The response was for the Federal Reserve to surge interest rates, which cost any consumer who has a credit card or financing for a car or home even more. Even now, inflation is down from a year ago, but remains far above the government’s goal. Blame it on Joe Biden.

That’s according to JP Morgan Chase CEO Jamie Dimon who was interviewed by the Economist. A report at the Daily Mail confirmed that Dimon questioned the effectiveness of “Bidenomics,” previously known as “Bidenflation,” and “blamed Joe Biden’s $5 trillion economic stimulus for causing inflation.”

Biden has been scheming to raise a lot of taxes, especially on the wealthy “in order to invest in the middle class,” the report said. That’s opposite the wildly successful plan used by President Ronald Reagan to grow the economy during his White House days.

“I’d be careful about that,” Dimon said of Biden’s agenda.

He said Bidenomics is more of an industrial policy, to help particular industries. He’s opposed those in the past, but sees them now as usable within a few narrow confines like national security.

“If it relates to supersonic missiles, I think we should do it. If it relates to holding down the Chinese people, I think we shouldn’t do it,” Dimon said. “There shouldn’t be social policy around that, it shouldn’t be political it should be purely economic.”

He also was critical Biden’s massive stimulus spending. He has continued concerns with inflation, which spiked nearly to the double digits just a year ago. And while that rate has slowed somewhat, those price spikes that hit consumers so hard then now are the base level for the new price surges they are seeing now.

Biden, as the octogenarian campaigns for another four years in office, has been promoting his “Bidenomics,” which involves a lot more taxes.

However, polling shows Americans widely dissatisfied and unhappy with Biden’s work on the economy. Nearly half have confirmed they are “a lot worse off” since Biden took office and largely abandoned economic goals of President Trump.

Biden’s first term has focused largely on promoting the LGBT, specifically the transgender, ideology, as well as abortion.

Article cross-posted from WND News Center.

Dimon warned at a May 22 Q&A Investor Day meeting at JPMorgan Chase that interest rates were likely to go higher from here and rise to as much as 7 percent.

He noted that there was much uncertainty about the health of regional banks and that rising yields in the money market have led to a steady outflow of deposits, bringing their balance sheets to dangerous levels.

A combination of Federal Reserve rate hikes and quantitative tightening is adding more fuel to the regional bank crisis. JPMorgan controls more than 13 percent of the nation’s deposits, with a lock on 21 percent of all credit card spending.

Under Dimon, the banking giant has gobbled up more of the lending market with each small bank failure, since the financial panic in March.

JPMorgan investors were told that they should expect to benefit from rising interest rates because of its recent acquisition of First Republic Bank. Dimon told meeting attendees, that net interest income this year would be revised from $81 billion to $84 billion, after the bank bought out the profitable operations of its smaller competitor in a deal with the FDIC.

Dimon Predicts Even Higher Interest Rates

Dimon addressed the central bank’s raising of the overnight rate and said there was still too much liquidity in the system.

The JPMorgan CEO said that the credit situation will probably get worse and that higher interest rates are likely, contradicting popular opinion that the Fed has reached the upper limit of its policy hikes. However, he assured investors that the U.S. economy was fine for now and that a “mild recession” would not hit until later in the year.

“Everyone should be prepared for rates going higher from here,” Dimon said, adding that capital is already tightening up and that the Fed funds rate would surge past its current level of 5 percent, to as high as 6 or 7 percent.

“There’s a chance you could have rates ticking up and not just 3.78,” said Dimon, calling 7 percent interest rates an “outlier but possible.”

Fed’s Quantitative Tightening Policy May Cause Another Bank Liquidity Crisis

With the Fed Funds rate at 5.25 percent and with Treasuries and money market funds offering similar yields, smaller banks are now buckling under the pressure. This could spark another disastrous bank deposit run from both checking and saving accounts.

Meanwhile, the Fed’s quantitative tightening policy is causing its monetary reserves to shrink and drying up the supply of available liquidity for banks, said Dimon.

The JPMorgan chief said that higher capital charges from the Fed would hurt the smaller banks, but not their larger peers like JPMorgan. He said that smaller banks face more problems on the deposit side, as they are less likely to absorb a financial blow from a lack of liquidity.

The American banking sector had benefited from low loan defaults over the last few years, due to almost zero interest rates and the flood of government stimulus money during the pandemic.

For two decades, lenders were encouraged to buy up low-yielding securities, but the vulnerable regional banks are now being squeezed, as yields soar and fixed-income and loan prices plunge. Deposits will now have to shift into treasuries, or face liquidation in a future bank run, said Durden.

“We haven’t been through Quantitative Tightening. So we really don’t know what’s going to happen to deposits at all. And that’s why I’ve been quite concerned about that. I’m probably more concerned about quantitative tightening with anybody in this room,” warned Dimon.

“We’ve never had QT before. It just started, okay? And you see huge distortions in the marketplace already.”

“We’ve never had the Fed in the market like this … They have $2.3 trillion basically lent out to money funds. And I don’t know the full effect of that. And obviously, that’s a direct deduction from deposits are rolling out it made sense to do,” he said.

“So I think people should build into their mindset that they may have to move deposit beta more than they think and manage that. So I mean, if I was any bank or any company, I’d be saying, can you handle higher interest rates and surprise in deposits, etc?” Dimon continued.

Commercial Real Estate Sector Exposed To Credit Crunch

Before the failure of Silicon Valley Bank set off the recent bank crisis, uninsured deposits were generally not seen as a problem, said Dimon, but the regulatory moves made in response will lead to tighter credit for smaller lenders.

This will in turn lead to even tighter credit from lenders to customers.

“You’re already seeing credit tighten up because the easiest way for a bank to retain capital is not to make the next loan,” he explained.

As banks raise the bar for lending, the commercial real estate sector is expected to suffer the most from tighter credit, which may spread to the wider economy. About 80 percent of commercial real estate loans are granted by the regional banks, which have been rattled by the monetary policy of the Fed and the outflow of capital, according to Goldman Sachs.

“There will be a credit cycle. My view is it will be very normal” with the exception of real estate, Dimon said, and that “there’s always an off-sides.”

He explained that “the off-sides in this case will probably be real estate. It’ll be certain locations, certain office properties, certain construction loans. It could be very isolated; it won’t be every bank.”

Commercial properties in upscale markets, like San Francisco and New York, are already losing money, as workers increasingly prefer to work remotely.

Article cross-posted from our premium news partners at The Epoch Times.