Jamie Dimon is shockingly optimistic about the U.S. economy.He says that everyone has a negative outlook for 5 reasons:
- Fiscal deficit
“That explains it,” he says.He told the Australian recently, “We are in this kind of malaise of some sort. Some of that is understandable. There are real issues that we are facing from Japan, oil, Greece, politics, fiscal deficit, and that explains it.”
Of course, with a list like that, who wouldn’t be down on the economy?
Everyone suspects that a Greek default would set-off defaults in Spain, Portugal, and whichever country is next on the list. And Spain would be a catastrophic default. Political issues are setting off debate about whether or not the U.S. might default on its debt, a scary suggestion that Dimon has admitted he’s “praying” will never happen. The fiscal deficit needs to be cut, yet negotiations are going nowhere. It looks freaking terrible out there.
But Dimon says that’s exactly why you should be optimistic. Not because it can’t get worse, but because, “People are reacting at the moment to every short-term stimulus. If you look at the basics, the big picture, America still has one of the mighty economies in the globe.”
The U.S. has “deep capital markets, innovation, capital expenditure, greater work ethics and great universities and that hasn’t changed.”
He goes into further detail about why Greece isn’t a big deal, and seems to have hope that regulation won’t curb growth long term, despite suggesting the opposite about 2 weeks ago.
Here are some excerpts from his interview in the Australian.
- “I think the Greek default is survivable, but it’s not a good thing for the global economy on top of all the things we are already worried about, and it will reverberate — it will have negative consequences.”
- “I don’t think [Greece] will default. I think the more likely outcome is that the European authorities and politicians will find a way to keep Greece from defaulting.”
- “It does reverberate because a lot of European banks own Greek debt and investors hold European bank debt. From all of the numbers I have seen, the European banks have enough capital to withstand it.”
- “I don’t think it’s going to freeze the capital markets of the world. We have had defaults around the world before — Russia, Argentina and Mexico — and they weren’t good events for global economies but they didn’t derail [global growth].”
On capital requirements and financial regulation:
- “The stress tests have raised the capital requirements and prove that banks can maintain a capital level of 5 per cent throughout a highly stressed environment.”
- “I think the Basel 3 requirements may distort global markets and make banks much more political.”I don’t think it’s necessary. I think some of the other measures are necessary, like the liquidity changes. I think it’s a typical overreaction at this point — that’s my own belief.”
- “It could slow the global economy. I can’t prove it, but I can almost guarantee that there has been enormous deleveraging taking place because of Basel 3.”
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