Jamie Dimon: Inflation Is Eroding Consumer Wealth And May Cause Recession

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Following is the unofficial transcript of a CNBC interview with JPMorgan Chase & Co (NYSE:JPM) Chairman & CEO Jamie Dimon on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Tuesday, December 6th from the Business Roundtable in Washington, DC. Following are links to video on CNBC.com:

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Crypto Is A Complete Sideshow, Tokens Are Like 'Pet Rocks,’ Says JPMorgan CEO Jamie Dimon

JPMorgan CEO Jamie Dimon: Inflation Is Eroding Consumer Wealth And May Cause Recession

BECKY QUICK: Jamie, let’s talk about what's happening. And it is great to see you and be back in person and I think there's so much happening right now around the globe. We've been waiting for this conversation.

You, you know what's happening in markets, you know what's happening in the economy. You know what's happening with consumers. What do you see right now? I think everybody was concerned what was it six months ago when you said a hurricane is coming, you better prepare.

JAMIE DIMON: Yeah so I didn't really say that but let’s just start by saying the United States’ economy is the strongest economy in the world today. So we should celebrate that a little bit and that's why capital is coming here, businesses are coming here, we’re still growing.

If you look in the short run, the consumer spending 10% more than last year and 40% more than pre-Covid. They're spending in different things. So all your speakers up here, some are doing better, some are doing worse.

That's a tremendous sum of money and they have a trillion and a half dollars still in their checking accounts more than pre-Covid so the spending is down. That's the good news and the companies are in good shape too, by the way, and they're balance sheets, consumer balance sheet are in great shape.

The other news which is not good is the rates are now you know 4% on their way to five. Inflation is eroding everything I just said and that a trillion and a half dollars will run out sometime midyear next year.

And so, when you're looking out forward, those things may very well derail the economy and cause this mild or hard recession that people are worried about. And but far more important than that by the way is all the geopolitical stuff.

QUICK: Wait but you said 5%, you said 5%. You really think that's where rates are going to stop?

DIMON: I think the Fed has made it clear they're gonna get to five and stop for a while. I read a while is three to six months. That may not be sufficient.

JOE KERNEN: You still go to five if the 10 year stays anchored at three and a half, you don't think it will. You think that 10 year is headed back up?

DIMON: I think that you have to look at the 10, the other risk we have is quantitative tightening. We've never had it before ever in the lifetime of mankind so I look at that as something we should be quite concerned about. And you know so this suppression of the 10 year bond rates has been going on for 20 years and it can't really be suppressed anymore.

And you know it’s just started so it's very possible and if you have like 2% inflation, you should have a 4% bond today. So I don't look at this like it's gotta go get better than here. Obviously it's a it's a risk on trade, but that that mindset may change if inflation sticks around a little bit longer.

QUICK: You said geopolitics is really the issue that we need to watch.

DIMON: Yeah.

QUICK: What, obviously—

DIMON: So you have this economy but then you have oil, food, fertilizer, war, humanitarian crisis. We've not had a war in Europe like this since 1945 and back then we said never again, and it's again and then of course it's causing all this people rethinking secure lines and China and trade and there's a lot of geopolitical upheaval.

And add to that, by the way, there are a lot of emerging market countries that a lot of people don't focus on are going to pay a heavy price to the strong dollar higher rates and higher oil prices. And so that stuff is really significant. I don't think we've seen that kind of turmoil in the global world for a long time.

And when I said about a hurricane, so that could, that storm clouds that could mitigate it could be a hurricane. We simply don't know and I think you know, as a risk manager, I prepare for both. But I'm not guessing which one's gonna happen. I simply don't know.

QUICK: As a, as a risk manager, which one looks like the more likely scenario?

DIMON: I don't know. I put, I put that whole mix of stuff and turmoil to be worried about, and we need great American leadership to resolve those issues. So that's the most important part.

ANDREW ROSS SORKIN: Can I throw into the mix, which I think is a small piece but maybe you think that's a bigger piece, Janet Yellen called the failure of FTX last week, a Lehman moment in crypto. I don't know if you think that's contained and doesn't matter, if you think it's a symbol of something larger that's happening in the economy.

DIMON: Crypto is a complete sideshow, okay, and you guys spend too much time on it and I've made my views perfectly clear about crypto tokens are like pet rocks, and people are hyping this stuff up. That doesn't mean blockchain is not real.

That doesn't mean smart contracts won't be real or Web 3.0 but crypto currencies that don't do anything, I don't understand why people are spending time but I don't think she meant a Lehman moment. I think she meant it as—

SORKIN: As a Lehman moment for crypto, yes.

DIMON: For crypto but crypto is worth a trillion dollars. The other thing the American public should look at, I mean look at crypto, if you look at all the buying and selling so if bitcoin is worth like under a trillion dollars today and we're not even sure that is a real market by the way.

That 20 to 30 billion of ransomware a year that we know about 20 to 30 billion of exchange costs that we know about, lots of AML anti-terrorism financing, tax avoidance, sex trafficking, in which what why we allow this stuff to take place and I think, you know, the regulators who beat up on banks should maybe focus a little more on crypto.

KERNEN: You were doing pretty well before crypto but crypto is about 2% of the of the let me ask you this. And this is what might keep me up at night. So wage price spirals, the labor market is different and there's one offs and there’s pandemic and there's participation rate and their skill sets aren't matched with what's going on.

But is a wage price spiral possible? Is that possibly in the cards of, what happened back in the we talked about it here, what was the real underlying cause that got us to a 13 and a half percent mortgage rate what, is that ever going to happen again?

DIMON: Okay, before you get to 13%, you had to year after year after year of lead inflation that you’ve got to control. This is I think the Fed has moved, we can all say a day late and a dollar short but it moved pretty quickly.

But you know, we had $6 trillion of fiscal stimulus over a two year period. You're not going to have $6 trillion of spending money, which is very different in quantitative easing, which is the Fed buying bonds and not have some kind of inflation.

KERNEN: But what else happened—

DIMON: But I don’t think—

KERNEN: Besides the energy crisis? What, did we print a lot of money? I was alive but I wasn’t following—

DIMON: The Vietnam War, lots of printing, didn't pay attention to prices going up over an extended period of time. So inflation started in like 1972 and then you’re talking about it didn’t hit the peak until 1982.

KERNEN: And we’re not on the cusp of some—

DIMON: I don’t think so.

KERNEN: Similar.

DIMON: I think we’re coming out of Covid, the Fed, the central banks have been, you know, quite aggressive recently.

SORKIN: Related issue to the central bank in the US, the dollar super strong. There is some concern that that becomes sort of a doom loop, meaning great for the US in certain ways but you think that all the multinational clients of yours and what that means in all these other markets.

QUICK: But it’s strong because they are raising rates.

DIMON: I think, I think—

SORKIN: Right but, but the balance is out of whack with all the other central banks and that's sort of the issue.

DIMON: That's just interest rates and currencies adjusting. So if you have the strongest economy, you're probably gonna have the strongest currency. And that is a given and I'm not worried about what it does to multinationals. I would be much more worried of what it does to developing countries.

SORKIN: No, no question but then it has that it has that impact. That's what they call—

DIMON: Yeah, I added that as one of the risks is the higher dollar rates and higher dollar on effect on the emerging markets around the world. And we should be very careful about that. And I would add to that, by the way, I think America needs doing better job on development finance, diplomacy, you know, helping some of these countries.

I just took a trip around Latin America and when you talk about China and trade, you know, they basically say things like, well, what's the alternative? You guys aren't down here. You know, you're not doing some of the stuff for us.

Your countries aren't investing in foreign direct investment so we need to do a lot to get our hands around that and I think the United States military's most amazing institution ever. But they, you know, Bob Gates often talks about it needs the orchestra of power is not just the military, it's also development finance, diplomacy, communication, telling the story about about the extraordinary capabilities of America, where we should be doing a little bit more of that too.

QUICK: How does that message sell in Washington though when you go to Congress, when you try to talk to them about foreign aid?

DIMON: You know, foreign aid doesn't sound great, but if you're talking about competing with China, it kind of resonates a little better. And if you go to Africa today or Europe today or or Latin America and China is everywhere.

And we simply don't do a particularly good job in development finance and it can be done by corporations too, I’m not just talking about foreign aid. I'm talking about helping like American businesses invest in places around the world intelligently.

KERNEN: Do we, should we still strive to be a frenemy of China? Do we need to do that? I think we do, don’t we? But it gets harder and harder, doesn’t it?

DIMON: Look, again, we talk about China all the time. America has all the food, water, energy it needs. Okay, we they import 11 million barrels of oil a day. They don't have enough food or water. They're, you know, we have this unbelievable most prosperous nation the world's ever seen, you know, and I we shouldn't cry in our soup. We're okay. I think we should have been focusing—

KERNEN: Globalization less, is it going to continue to wane?

DIMON: I think you'll take, take all of globalization, I think a portion will be reversed a portion as people restructure secure lines and supply chains and the government's going to put a lot of rules in place which they should properly not overdo it about export controls and investment controls but after that no, global trade will not go away.

And so, you know, we're in a competition with China. I'll leave the military stuff to the military but and we're gonna out compete them. You're not going to be able to out compete the United States as long as we nurture this wonderful economy.

KERNEN: We know how attractive their consumers are. I mean, there is no way American business cannot say I want that market.

DIMON: If you separate the world of two trading blocks, this would be the better trading block. So obviously—

KERNEN: Well tell that to the NBA or with—

DIMON: Obviously, you know, they're a huge market. We should try to be competitors but not, you know, hostile forces with each other so.

QUICK: Jamie, let's talk about shareholder rights and the movement that the Business Roundtable has been going after for the last three years. We brought this up earlier today with Josh Bolten. Looking at all stakeholders, that has translated in some ways into woke capitalism and there's some pushback from the red states and from other places. What do you say to defend that? How do you how do you explain to them what this really is?

DIMON: Well, I don’t think that has anything to do with woke capitalism. And I don't even know what people mean when they say woke because a lot of issues out there. When I gave the job of running consumer to some of our top women, I walked up to them and said, you know, you're all gonna get this job not because you're so smart, which you are, because you have heart.

And that heart to me is that they give a damn about the 150,000 employees and the millions of customers going in and out those doors every day and I mean that. I care about my employees, and you guys can bind, say it’s shareholder value.

I've said this 100 times to you all, shareholder value in the American public here shareholder value, they hear short term or profit taking fiduciary standing behind your lawyers at the expense of customers and employees.

I need you to come back. If you go to a restaurant, they take care of you. You know, I mean, what's the notion that we shouldn’t be taking care of our employees and customers. Do you want me to stop and you talk about woke, you want me to stop hiring veterans?

You know, we started that 100,000 Jobs Mission it’s now, it's now 300 companies that hired 800,000 veterans, you tell me that's bad to do? And if we lift up society if you're either in a small town or a big town, and if we get involved in policy—  

KERNEN: Business Roundtable decided to adopt, you’ve been doing that all along.

DIMON: If you lift up society, business is better off.

KERNEN: When were you not doing that?

DIMON: Always did it.

KERNEN: That’s what I mean.

DIMON: Always did.

SORKIN: But hold on, this is where it got more complicated.

DIMON: We did because, because people thought they misread shareholder value and they think that we’re being we’re patient profit taking—

SORKIN: Here’s, here’s where it got more complicated. There are states, as you know because you've written letters to them where they've said, look, we're not gonna allow you to issue municipal bonds in this state if if you you know, don't loan money to fossil fuel companies or you don't do business with gun companies or other things where you have taken a stance for whatever reason, whether it's may it may very well be your for your employees, but now, because of that backlash, it's become very complicated.

DIMON: I don't think it has anything to do with that statement. So you're just confusing apples and oranges. Now, businesses are being dragged into all these various issues. We defend our people we defend our rights we have we have our own right to free speech. If a state wants to do something like that, so be it.

We're one of the big, you know, we support all the big oil companies who by the way are the ones are going to pay for most of this transition to reduce CO2. They're doing the best job but also, you know, my view is that we will do the right thing and some of those states will question it and they have the right to question it and, and of course those states—

KERNEN: Wasn’t that a great moment, who was it that said, will you pledge right here right now to not support any fossil fuel company? What did you say, you just—

DIMON: Road to hell for America. That played all around the world.

KERNEN: You were classic, that was classic Jamie Dimon. You go, no I’m not, are you out of your mind?

DIMON: We need, we need, the lesson wasn't learned from Ukraine, we need cheap, reliable, safe, secure energy of which 80% comes from oil and gas. And that number is gonna be very high for 10 or 20 years. That’s not again CO2.

Okay, so, we've been telling people that higher oil and gas prices are leading to more CO2 so having a cheaper has the virtue of reducing CO2 because all that’s happening around the world is that poorer nations, richer nations are trading back on their coal plants.

We have to stop this thing like it's one versus the other. It's not, we need some I've said before, it's all the above. And we need all those things to work well. And when if we get it right, we can reduce CO2. And the other thing that’s going to hurt is poor people in poor nations. And is that what you want? Is that what you really want to accomplish it has to be good for the globe. So you know, people should be more thoughtful—

KERNEN: There are way too many dots here.

DIMON: It's very complicated for—

KERNEN: Way too many dots.

SORKIN: Broader economic question, but it relates to banking. How do you maybe not your own loan book but when you look at the loan book that's out there if you will to corporate America to the private equity firms to everything else, if we do have a hard landing, how dangerous is that?

I know there's been the creation in private equity, for example of this idea of collateralized fund obligations, which is sort of like the old, collateralized debt obligations except it's now taking all the debt from the funds and slicing them up in the same way and creating a new instrument that when we look at those type of things, do you get concerned?

DIMON: No. The American, yes, but not for the reason you're thinking. The American banking system is unbelievably sound in a million different ways in our capital cup runneth over. And you know, and I'm proud of what we do as a company for individuals, small businesses, governments, IMF, World Bank, large corporations, middle market companies, you know, we, if you go to a branch right across the river here, LMI neighborhoods, you know, lifting up people around the world, small businesses, cities, states, schools, hospitals, that's what we do.

And I'm damn proud of that. And these banks, not just minor, are extremely strong. And so there are always new financial instruments out there. If you're always gonna make a book about what goes wrong, it's always new financial instruments. So I became, but they're not systemic most of the things you mentioned.

They're not big enough to be systemic, our loan books and I think the banks will have a normal cycle, whatever that cycle is. It won't be like an ’08, it’ll just be a normal credit cycle and, you know, if you have a recession, you have a higher credit losses, but, but I always tell people, we're here to serve people through the cycle.

We're not gonna, I don't want to pull back in the cycle and in spite of the fact that that's kind of what some of the rules and regulations make you do. But I want to be here in good times and bad, more importantly bad times for you—

QUICK: What will you do less of, what are you, what are you doing less of as a result of the concerns about what's coming? Is it home loans in certain places, what—

DIMON: You’d be surprised. We, the management team goes through and looks at what we can handle, what we can’t so we're not going to pull back on anything because we might go into recession. In fact, the banks, you know, before the Fed intervened, laid out hundreds of billions of dollars to their clients, you know, pre-Covid, and, you know, we're making markets aggressively before the Fed intervenes. I've heard this cockamamie thing that somehow the banks were bailed out by the Fed. They were not.

You know, we did, we did quite well trading before they intervened. And we were out there helping our clients. And so what you could do to mitigate risk a little bit is you might, you know, do less subprime do less than, maybe not do new customers.

You know, and obviously, if a bank is in any kind of trouble, they’re gonna be much more restrictive than a bank who is doing quite well. But, but we look at it, the budget kind of looks at how we do if things were good, how we do if things were bad, and our plans are very consistent. We're going to hire, train, recruit, invest country after country bank after bank, and now in 48 branch states which we're very proud of and we’ll just keep on expanding the—

KERNEN: The entire business news landscape needs a headline from Jamie Dimon about a recession next year. I'm sorry, you're here. We've got you. So Jamie Dimon says yes, there will be a recession in 2023 or no there will not be—

DIMON: Joe, this is exactly what all my handlers out there say is, don't give them that stupid headline. I'm not gonna do it.

KERNEN: You're not gonna do.


KERNEN: So what are we supposed to say then? Jamie Dimon said there's—

QUICK: Said America’s great.

DIMON: America is extraordinary. Those of you who travel the world, all the folks out here, you come back to this country and you look at the innovation, the growth, the universities, even with all our squabbling in the government which I don't particularly like, and that's why you know, and Josh Bolten who was on TV and what an unbelievable job Josh Bolton does is about policy.

We need policy on infrastructure, education, taxation, regulation, healthcare. We can do a lot of things that can grow this country. I'll give you another number. We grew at 2% a year like 1.7% a year from 2000 to 2020.

And there are a lot of reasons for that which I won't go through now I will go through in a second, but have we grown at 3% and we should have aspired to 3%, GDP per person would be $15,000 year higher today.

You could afford a lot more other things and the reason in my view we grew at 2% and not three, the reason is excessive regulation, healthcare, infrastructure, inner city school education, and in that one, you know, education if you look at it, jobs bring dignity.

We need kids to be trained to have jobs and a lot of the companies that are on here today spend a lot of time on that and we want these kids to have jobs and these companies pay well.

QUICK: There's a story out today that you are trying to tackle healthcare once again. You had the initiative with Amazon and Berkshire that you canceled out and said it's not working, what are you doing differently this time?

DIMON: The objective, you know, you live and learn. So was that a failure? No. I mean, we've made tons of mistakes. We've kind of modified from that. It's the same objective, we spent $2 billion in healthcare. We've got 450,000 insured so that includes their families.

We want you to be healthier. So if you get preventive care which we're testing these things in Columbus, if you get preventive care, you know that could save your life. If you have high blood pressure or diabetes you didn't know about and then also managed care. I mean are you getting the right kind of care you need to manage that you have.

Telemedicine is going to work for depression. There are a lot of things that have worked for, for drugs. So to me there’s a lot to work here and Walmart and I know Doug, they've done a great job and so, there's a lot to learn. We're gonna go at it and we want our, we want our employees to be healthier, happier, and and hopefully at a lower cost.