While the US economy remains strong globally, rising interest rates and inflation will deplete the public cash that was stored during the coronavirus crisis by mid-2023, he said.
According to him, these factors could cause a moderate or even deep recession next year.
Damon already He was also pessimistic in OctoberHe then said that the US economy could recession in 6-9 months and the stock markets could drop another 20%.
The warning of the head of the American giant bank about the decline in savings coincides with the decline in money growth – Mentionsed Barons. M2 (which includes, in addition to the monetary base, deposits and liquid assets) increased by 1.3% in October compared to October of the previous year, which is the lowest growth rate since May 1995. In February 2021, M2 money volume increased by almost 30% on a year-on-year basis annual.
The rapid increase in the amount of money began in 2020, when interest rates fell further, the central bank began to buy assets, and the population was saved because they could not spend the newly acquired money. In 2022, the growth of the money supply slows down, which is believed to be largely caused by the Federal Reserve raising interest rates (the main interest rate rose to 3.75-4%). The Federal Reserve will raise interest rates further.
Barrons reminds us that changes in the money supply can be an indicator of changes in the economic cycle. The money supply rose in the run-up to the Great Depression of 1929, and then began to fall before the Depression. But today the situation is different: $21 trillion is still considered excessively high.
Dimon also acknowledged that residents’ savings are still much higher than they would have been without the coronavirus. However, according to him
This will not last long.
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