Should investors start worrying now about the next financial crisis? JP Morgan's CEO Jamie Dimon implied that an upcoming crisis is likely. His assumption could be coming from a couple of different issues: a collapse in commodity prices, a recession or an asset price. Others have expressed concern about the lack of liquidity, specifically in the bond market. Even more, investors are discouraged by an expected increase in volatility in the US stock market.
Dimon "argued the crackdown on the financial sector, added to more-stringent requirements for capital and liquidity, will hamper banks' capacity to act as a buffer against shocks in financial markets." This article expresses his concern regarding liquid markets and he argues why the next crisis will be even more volatile.
In Forbes evaluation of Dimon's implications, its indicated that "Dimon appears to be trying to recapture the touch that once served him so well." This article seems like they are somewhat questioning Dimon and he is just looking for a spotlight.
What do you think on a future crisis or Dimon's perspective on one?
Dimon seems as if he's persuading JP Morgan's investors to vote for a candidate that will release some of the private sector regulations that were levied after the recession. His reasoning is quite vague and doesn't get into a terrible amount of detail. However, he's most likely right in saying that another recession would occur if the U.S. fell victim to another credit crunch, coupled with illiquid financial markets. Yet, he most likely isn't right in saying that new regulations will cause this. More likely than not, the regulations may weaken banks' profit margins as they cut out many arbitrage opportunities, but they should also inspire investor confidence and uphold liquidity in financial markets.
ReplyDeleteDimon is right on the fact that the U.S. should be more careful not to repeat the same financial mistake. I doubt that there will be a future crisis anytime soon, but let's not be too optimistic because bubbles are getting reformed in many places. And If growth is not at the rendezvous, or if a geopolitical crisis is interrupted let's say in Ukraine, China,or elsewhere, these bubbles will explode; interest rates will go up;financing loans will become very difficult; globalization will do the rest.
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