JPMorgan’s longest serving CEO Jamie Dimon is a regular visitor to India where his firm has 40,000 employees, most of them doing global work. Since the pandemic, he is back on the road and has made a couple of trips to Europe and is hoping to visit India in six to nine months. In an online interview with TOI, he shared his assessment of the global economic situation and India. Excerpts:
How do you see the state of the US economy, particularly in light of (US treasury secretary) Janet Yellen’s statements, saying that there is a risk of default?
In the US, the
variant is kind of a wet blanket, but the economy is doing quite well. The rest of this year is going to grow something like 5-6%. The table is set rather well, consumers are in very good shape, they have a lot of extra cash, they have paid down debt. Usually, when debt gets paid down, it’s a sign of a recession. This is more a sign of the pump being primed. The spend today is 20% over what it was pre-Covid. Travel is coming back up, albeit slower. Even if they spend at this level, confidence is going up equally. Companies are in very good shape. There is a lot of cash and a lot of capability. Capex is starting to go up again, because of the demand. The debt ceiling — we’ve had this before. It’s irresponsible on our part to even get close to it. No one assumes there will be a default. If we did, that would be bad, but I think they’ll get over that.
So you don’t see any risks right now?
There are always risks, but people sometimes overestimate the risk just like sometimes they underestimate them. Geopolitics has always been a risk. The biggest geopolitical risk today is China. But that won’t necessarily derail the economy. And while we are coming out of the Delta variant, if you have another deadly variant, all bets are off on that one. So, hopefully, that won’t happen.
Which are the economies you’re bullish on? How do you look at China the way things are unfolding there?
America is coming out of it…pretty good growth, which can go on for a while. I think Europe is probably six months behind us. For the rest of the world, you really can’t put it in one category because every country is different. But in general, the more developed markets look okay. China’s growth has slowed. But the real issue with China is people got to look a little bit more long-term, and they do a pretty good job managing their economy.
The big fear in 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 amounts of quantitative easing and fiscal stimulus. They are powerful drugs into the system and drive growth in slightly different ways. We need growth. Growth is the antidote for everything. Inflation is probably a transitory piece. It is currently 3.5% or 4% and as they start to taper, you’ll read about it. It’ll be November, December, January, based upon the Delta variant. But if that happens, and inflation goes up, long rates will go to 3% or 3.5% over the next 18 months or so, we’ll be fine. Growth is far more important than that inflationary number or bond rates going up. The stock market anticipates healthy growth and earnings. The bond market may not anticipate that, and that may be because the flows of money and liquidity are so high — it’s like a tsunami coming over them. So, I expect rates to go up. I’ve been wrong on that one before. But we’ll see.
Have your plans for India changed after Covid?
Absolutely not. India has a great long-term growth capability. And how good that growth will be, will be predicated upon the seriousness and detail of your policies and the implementation of policies. JPMorgan invests for the long run. The bankruptcy code, taxes and reducing bureaucracy & building infrastructure and privatising are critical to growth. I still say that India has great long-term potential. We have 40,000 employees and we have built massive centres. We just finished one in Hyderabad, which will eventually have 8,000 people. The policy you implement over the next 10 or 20 years will determine the growth rate. A healthy rate of growth is good for all your citizens.
The Indian government has announced a very ambitious asset monetisation and divestment programme that needs about $80 billion. Do you think there’s an absorption capacity for this?
I do. It’s not the money, per se, it’s the regulations. It is the transparency, the ability to buy and sell freely. it is the consistency of law. It makes a lot of sense to sell a lot of assets. Governments should acknowledge the things they don’t do well. Like banking. If you start making loans for political purposes, they will be bad loans. I’m 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 properly around financial market transparency, international banks, etc.
Bank privatisation is part of the agenda for the first time. How do you see this?
It relates to what rules are imposed upon those banks. Can you operate them properly? Do you have constraints? It’s not just privatisation. Transparency, rule of law, ability to operate governance, accounting, all those various things — if they do it right, you could have very vibrant banks. People tend to think that’s just good for the wealthy. But it’s really good for the lower-income, jobs and wages go up with healthy economies. And then you can also afford a lot more social programmes. I’m very supportive of ways in raising minimum wages in the US, but if you don’t do it wisely, it will be worse in the long run.
There’s a debate happening here on bitcoins and cryptocurrencies, whether they should be banned or regulated… How do you view this?
I don’t really care about bitcoin. I think people waste too much time and breath on it. But it is going to be regulated. Governments regulate just about everything. I don’t know if it’s an asset. I don’t know if it’s foreign exchange. I don’t know if it’s a currency. I don’t know if it’s the securities laws, but they’re going to do it. And that will constrain it to some extent. But whether it eliminates it, I have no idea and I don’t personally care. I am not a buyer of bitcoin. I think if you borrow money to buy bitcoin, you’re a fool. That does not mean it can’t go 10 times in price in the next five years. But I don’t care about that. I learned a long time ago figure out what you want, do what you want and be successful yourself. I remember when beanie babies were selling for $2,000 a pop. We all know about tulip bulbs. We all know about internet stocks. Speculation happens in every market around the world, including in communist countries. So, I don’t know why there is a surprise with a lot of speculation, particularly when there’s as much liquidity in the system.