“Governments have to accept what they don’t do well, like the bank”

Mayur Shetty and Sidhartha | TNN
JPMorgan’s longest-serving CEO, Jamie Dimon, is a regular visitor to India, where his company has 40,000 employees, most of whom work globally. Since the pandemic he has been back on the road and has made a few trips to Europe and hopes to be in India in six to nine months. In an online interview with TOI, he shared his assessment of the global economic situation and India. Extracts:
How do you see the state of the US economy, especially in light of (US Treasury Secretary) Janet Yellen’s statements that there is a risk of default?
In the United States, the Delta variant is kind of a wet blanket, but the economy is doing pretty well. The rest of this year will grow something like 5-6%. The table is pretty well set, consumers are in very good shape, they have a lot of extra cash, they’ve paid off their debts. Usually, when the debt is paid off, it is a sign of a recession. Rather, it is a sign of priming the pump. Spending today is 20% higher than it was before Covid. Travel resumes, albeit more slowly. Even if they spend at this level, confidence also increases. The companies are in very good shape. There is a lot of money and a lot of capacity. Capex are starting to rise again, due to demand. The debt ceiling – we already had it. It is irresponsible of us to approach it. No one is assuming that there will be a fault. If we did it would be bad, but I think they will get over it.
So you don’t see any risk at the moment?
There are always risks, but people sometimes overestimate the risk and sometimes they underestimate it. Geopolitics has always been a risk. The biggest geopolitical risk today is China. But that won’t necessarily derail the economy. And as we roll out of the Delta variant, if you have another lethal variant, all bets are off on that one. So hopefully that won’t happen.
What savings are you optimistic about? How do you see China in the way things are going there?
America is doing… pretty good growth, which can last for a while. I think Europe is probably six months behind. For the rest of the world, you really can’t put it in a category because every country is different. But in general, the more developed markets look okay. China’s growth has slowed. But the real problem with China is that people have to look a little bit more in the long term, and they’re doing a pretty good job of running their economy.
The big fear of the market is inflation and the withdrawal of all the liquidity that is floating around …
It is a legitimate concern. The world has embarked on massive quantitative easing and fiscal stimulus. They are potent drugs in the system and stimulate growth in slightly different ways. We need growth. Growth is the antidote to everything. Inflation is probably a transitional play. It is currently 3.5% or 4% and as it starts to decrease you will know about it. It will be November, December, January, based on the Delta variant. But if that happens and inflation rises long rates will drop to 3% or 3.5% over the next 18 months or so, you will be fine. Growth is much more important than this inflationary figure or as bond rates rise. The stock market anticipates healthy growth and earnings. The bond market may not anticipate this, and maybe that’s because the cash flow and cash flow is so high – it’s like a tsunami overwhelming them. So I expect the rates to go up. I was already wrong on that one. We will see.
Have your plans for India changed after Covid?
Absolutely not. India has a great capacity for long-term growth. And the quality of that growth will depend on the seriousness and detail of your policies and their implementation. JPMorgan invests for the long term. The bankruptcy code, taxes and red tape reduction, infrastructure construction and privatization are essential for growth. I say again that India has great long term potential. We have 40,000 employees and we have built massive centers. We have just completed one in Hyderabad, which will eventually have 8,000 people. The policy you implement over the next 10 or 20 years will determine the rate of growth. A healthy growth rate is good for all of your citizens.
The Indian government has announced a very ambitious monetization and asset divestiture program that requires around $ 80 billion. Do you think there is an absorptive capacity for this?
I do. It’s not the money per se, it’s the regulations. It is transparency, the ability to buy and sell freely. it is the consistency of the law. It makes a lot of sense to sell a lot of assets. Governments should recognize the things they do not do well. Like the bank. If you start making loans for political purposes, they will be bad loans. I am optimistic because your government has generally tried to do the right things, and this is one of them. India could attract a lot more foreign direct investment, if it does a lot of things right around the transparency of financial markets, international banks, etc.
The privatization of banks is on the agenda for the first time. How do you see it?
This concerns the rules imposed on these banks. Can you make them work properly? Do you have any constraints? It’s not just about privatization. Transparency, the rule of law, the ability to manage governance, accounting, all of those various things – if they do it right, you could have very vibrant banks. People tend to think it’s just good for the rich. But it’s really good for low incomes, jobs and wages increase with healthy savings. And then you can also afford a lot more social programs. I’m very supportive of ways to raise the minimum wage in the United States, but if you don’t do it wisely, it will be worse in the long run. There is a debate here about bitcoin and cryptocurrency, whether to be banned or regulated … how do you see that?
I don’t really care about bitcoin. I think people waste too much time and breathe on it. But it’s going to be regulated. Governments regulate just about everything. I don’t know if this is an asset. I do not know if it is exchange. I don’t know if it’s a currency. I don’t know if these are the securities laws, but they will. And that will limit it to some extent. But if that eliminates it, I have no idea and I don’t care personally. I am not a bitcoin buyer. I think if you borrow money to buy bitcoin you are a jerk. That’s not to say its price can’t be multiplied by 10 over the next five years. But I don’t care about that. I learned a long time ago to figure out what you want, to do what you want, and to be successful on your own. I remember when baby hats were selling for $ 2,000 a pop. We all know tulip bulbs. We all know about internet stocks. Speculation occurs in all the markets of the world, including in the communist countries. So, I don’t know why there is a surprise with a lot of speculation, especially when there is so much liquidity in the system.
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