Jamie Dimon says that the US economy should have grown perhaps 40% in the recent recovery rather than the 20% it did. He also goes on to tell us what is wrong with the US economy as a whole, what has caused this gap in recovery. He’s wrong and he’s not even interestingly wrong, just fashionably so. He’s just muttering half recalled things that are splattered over the newspapers rather than actually describing that real economy out there. All of which is something of a worry really.
Speaking at an event from the firm’s New York headquarters, Dimon acknowledged that the global economy over the years has “grown enormously.” “It’s lifted billions of people out of poverty. It’s done quite well. It does not mean there aren’t flaws. I think we should distinguish that,” Dimon said.
All of that’s true. This past few decades has seen the largest reduction in absolute poverty in the history of our species. Quite an achievement that. One that also doesn’t mean that everything is perfect, quite right about that.
However, he pointed out that the American economy has grown 20% in the last decade, but argues that it should have been 40%. “A normal recovery would have been 40%.”
A normal recovery might well have been. But then all the economists have been telling us all along that recovery from a financial crisis induced recession is a great deal harder, longer and slower than from the more usual causes of a recession – say, Fed tightening of monetary conditions. There’s simply no surprise that this time around wasn’t quite so good – the cause was different.
Dimon said it’s “absolutely obvious” that a “big chunk” of the economy has been left behind. “Forty percent of American people make less than $15 per hour; 40% of Americans can’t afford a $400 bill whether medical or fixing their car, or something like that; 15% of Americans make minimum wages; 70,000 die from opioids; and, inner-city schools…that’s where 50% aren’t graduating,” Dimon said.
It’s large chunks of that which need to be dealt with, perhaps corrected. The 40% making less than $15 an hour, fair enough. The median wage – part and full time – is in the $17 to $18 an hour range. So, yes, we’d expect some 40% or so to be under a little lower than that. That’s just how averages work.
The 40% of Americans can’t afford a $400 bill just isn’t true. And someone who lends out money for a living should know that it’s not true too. The finding is that 40% couldn’t cover such a bill without borrowing. That is, they’ve not got short term cash savings of that amount – do note this doesn’t mean they’ve not got savings of that amount. Most will have a pension of more than that, much more, but that’s long term savings. But those 40% of Americans can go and borrow that $400 to pay that bill. Or near all of them can.
You know, we’ve got banks like JP Morgan that lend people money?
And there’s more than just snark to this. The point and purpose of having short term cash savings is to be able to respond to such emergencies. But if we’ve a developed financial system which smooths lifetime earnings for us then we don’t need to have those cash savings. The credit line is that ability to smooth earnings over emergencies.
The thought that 15% of Americans make minimum wages is just tosh. The actual number is more like 3% or so make the Federal minimum wage. And a good half or more of those are in jobs that gain tips – tipped workers not relying on what they get in their pay packet because, you know, tips? Opioids, yes, and a goodly portion of that is the illegality of them. And of course inner city schools but then the teachers’ union control of those systems has been a scandal for decades.
It’s slightly worrying when one who runs a rather large chunk of our economy doesn’t actually know the figures about that economy he’s running such a part of. Actually, it might help to explain why public policy is as lousy as it is. The people making it have little clue about what’s actually happening….