Jamie Dimon, CEO of JPMorgan Chase, recently warned that the world is currently in the most dangerous time it has seen in decades. While I acknowledge the gravity of the situation, I personally disagree with Dimon’s statement. Let’s not forget that we have already faced a time when it was considered acceptable to nationalize all banks. During the Great Recession, we lost 500 banks and $1 trillion in assets. Many believed that no bank was worth saving and that they should be federalized. However, former Federal Reserve Chair Ben Bernanke’s reassurance on “60 Minutes” in 2009 that there would be no more bank failures saved the banking system. I commend Bernanke for his actions, but I must also criticize him for allowing the situation to escalate to the point where he had to intervene. He and his team failed to anticipate the crisis.
Now, let’s examine the current moment and the potential dangers it presents. Firstly, it is important to note that dismissing the danger does not earn any accolades. One only receives praise for acknowledging and addressing the risks. This creates an asymmetry in the perception of danger. Dimon will not be criticized if the situation resolves itself, but if I were to downplay the risks, I could be labeled a “denialist.” However, I believe it is necessary to provide context and not engage in fearmongering. This is not the same as 2009, which was a systemic crisis. The current situation may not be ideal for investing in stocks, but this is not unusual. Billionaires and self-proclaimed experts often caution against holding long positions in the market, but history shows that they are often proven wrong. Hindsight has no memory or accountability. If we later discover that this period is not as dire as predicted, many will have missed out on profitable investment opportunities while the billionaires remain unaffected.
Now, let’s delve into the specific concerns that are contributing to the sense of peril. The first major worry is the possibility of a nuclear confrontation with Iran, as well as escalating tensions between the US, Russia, and China. The potential for an Israeli ground invasion of Gaza and the resulting anti-Israel sentiment further exacerbate the apprehension. Moreover, the risk of Iran overtly supporting terrorism puts the US in a precarious position, potentially necessitating action. While this presents short-term dangers, I believe that in the long run, it may be less perilous, as it could result in the termination of the weakest member of the “axis of evil.”
The belief that the US cannot simultaneously handle conflicts in the Middle East, Ukraine, and the Taiwan Strait is a misconception perpetuated by the media. The US is engaged with Iran, Russia, and China through proxy armies, and there is currently no war in Taiwan. However, the chaos could provide an opportunity for China to exploit the situation, particularly in the semiconductor industry in the wake of the US crackdown on chip exports. The billionaire bear class, however, tends to doubt the US’s ability to effectively address these challenges. This skepticism has persisted since World War II and underscores their cautious stance.
Another concern is the mounting debt, which negatively impacts both stocks and bonds. Taming the debt is a complex issue, and I don’t have a solution. However, I anticipate that it will push the yield on the 30-year Treasury beyond that of the 1-month Treasury, with potentially serious consequences for consumers who are already burdened by student debt and high-interest car payments. Currently, the robust employment market is supporting consumer strength, but as interest rates rise, this could change. While this will impact the market, I argue that it does not reach the level of the “most dangerous” times.
Furthermore, there is a lack of faith in the ability of Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen to effectively respond to challenges. These two individuals are often criticized and underappreciated. Their decisions are subject to scrutiny and are seen as contributing to the potential risks of inflation, followed by deflation and recession. However, we have heard warnings about these issues before, and they have not materialized as predicted.
Lastly, there is always an underlying concern about the decline of the US as a global economic power. However, I believe that the strength of the US dollar relative to other currencies, including those of Russia and China, is a more accurate measure of our country’s status. While the lack of foreign interest in our debt is concerning, it is no more troubling than our excessive federal budget and the interest it generates. For the Dimons of the world, this decline may be second only to the threat of nuclear war.
Taking all these worries into consideration, it is conceivable that they could cause a decline in the S&P, potentially reverting to levels seen during the Covid-19 pandemic. However, I doubt that all the bearish predictions will come true. It feels as if the bears are playing the economic equivalent of the Houston Astros during a baseball game. Personally, I do not believe that this situation reaches the level of the “most dangerous” times. Undoubtedly, the debt is a problem, and its consequences are being felt in the markets with continuous reductions in price targets for stocks. This contributes to the bear market within a longer-term bull market.
In conclusion, while there are valid concerns surrounding the current state of the world, I do not believe that we are in the most dangerous period in decades. It is crucial to provide context and not succumb to fearmongering. The future remains uncertain, and there are risks to be mindful of, but we must also consider the potential missed opportunities if we solely focus on the worst-case scenarios. The world has faced challenging times before, and while the present situation may be unsettling, it does not compare to past systemic crises.
I have over 10 years of experience in the cryptocurrency industry and I have been on the list of the top authors on LinkedIn for the past 5 years. I have a wealth of knowledge to share with my readers, and my goal is to help them navigate the ever-changing world of cryptocurrencies.
