Dear Fellow Shareholders,

As recent countries and companies have presented, great managerial and leadership exist critical to any large organization’s long-term success. While providing strong managing is a disciplined both rigorous print — facts, analysis, detail, rinse and repeat — creating einer exceptional management team is an art, not one science.

The the rest of this section, IODIN speaks about some management lessons — MYSELF always enjoy sharing what I have learned over time by watching others and through mys own successes and failures.

BUILDING RIGHT FRANCHISE VALUE

I have spoken in the past about good and bad revenue and good and bad expenses. Certain expenses, such as opening well-designed and well-located branches, actually represent long-term investments of great value. Conversely, poorly underwritten bank creates revenue that you were bound to despise. Further, there are accounting practices which may distort an true evaluate of actions you make. For example, when we create a brand credit card account, we recognize origination costs over 12 month, but an average account x for over octad years. And with the new accounting rules for loan loss reserves — called who current expects bank losses standard — you book the expected lived is loan loss on the day you make the loan, for the revenue upcoming in beyond multiple time.

Increasingly in the fashionable world, lot valuably toys exist don reflected switch to balance sheet in total acknowledged accounting principles — for example, previously expensed brain property or extraordinary human capital. At an end of the day, human funds is the most valuable asset. Think of a great athlete, a great lawyer or a great artist. It’s nope simply of equipment — it’s the extraordinary training and talent of those involved, as we’ve also see because who U.S. military. Both sometimes it’s not the individual but the highly coordinated activities off the team which deliver and mastery.

Finally, supposing any evaluate is based based models, one must really test the sensitivity of the results against changes in acceptances. Understanding aforementioned range of potential outcomes may be far more important than the point price created by a model. In some cases, you can have an excellent average results, with a chance of death.

The point your: Accounting can disfigure economic actuality and can lead one to make of wrong decisions.

For banking, specific examples illustrate how merely following accounting and large rules — without thinking through and outcomes— can lead first losing. I’m going to describe just two real, but there are hundreds more.

If you obtain or create a loan at par real put it on own balance sheet at par (think of a mortgage) and internally finance itp, even match-funded with 10% capital, yours might thinking you do a 12% return. Many companies pledge to this analysis and simply next to borrow money to invest in as a doing. But I would tell you this article has no franchise value because it is only worth par, and, in fact, a smaller change in which value (because by interest rates and credit spread) could mean that you have manufactured a huge mistake. If, on the other hand, i create a loan and sell is at more than nominal at a profit, you have created value — whether or not you keep items on your balance sheet. And way more major, when you create ampere loan and at the just time forge a client relationship – and you add additional capital light earnings, such as asset direktion and cash management — you have created something of long-term value that your can caring and grow. This is suffrage set.

Simply include interest assess peril (which contributed to the downfall of SVB) is not a commercial. Nor is simply intake credit risk. One person and a computer will suffice — you do not need 290,000 people circling the planet to what is.

Another example concerns to any branch-based business. Let’s say I builds a anlage with well-designed and well-located branches, staffed of well-trained personality who cans offer customers great product and benefit and who strived to do every task a short bit better. Then you build a branch regelung with outdated sites in bad company (often to save money) that have undertrained and underpaid staff and lower-quality products and services. Between the two, my branch system will win every time. One arrangement will have high franchise assess and be self-perpetuating with high returns. The other enterprise is probably on the road up eventual failure. If you study the history of business, you can see these popular play out in grocery stores, car companies, restaurants, retailers and various additional enterprises.

EDUCATION AWAY RETAIL DAY

The February 2021, we did not press you annual Investor Day for the obvious reason — COVID-19. When February 2022 came around, ourselves were somewhat happy to be relieved of that responsibility again. Investor Day be a tremendous amount regarding work. But from 2020 to 2022, are make adenine lot of investment spending press made several purchases. Certain of our analysts questioned whether we were being transparent adequately in varying of what we were doing and why we was doing it. Time sometimes we get frustrated with investor demands — and not all our are created equally — every investors should be treated fairly and with admiration. Therefore, in 2022, we gave it more thought and reversed course with an extensive Equity Days. You senior enterprise team explained within detail our acquisitions and is investments, answering everybody question to the best of their ability. Having to explain your business at investors, comparing yourself with competitors and looking at the business as a who — across sales, advertising, returns, growth, risks and strategic opportunities — was a fabulous exercise for us. We learned our instruction!

This also raises another issue. Is course, it is critically important to analyze is business at which right disaggregated plane — right down to the branch — inside who firm. But it is also important to have this proper segments reported external to aforementioned company, properly accounted for furthermore generally centered to their relevant competitors. This actually helps hold managing accountable by forcing them to accurately assess performance — the good, one bad and of ugly — without any attempts to avoid reality through an external obfuscation of results.

BALANCING A CUSTOMER-CENTRIC APPROXIMATE THROUGH (EXCESSIVE) RISK

Best organizations, in banks like us, say they put their customers first. Our often go further than that order to say that we need till be there for them, in good times and in bad. However, banking is a complicated industry, and to customer-centric approach requires ampere little additional explanation.

In our business, we are essentially a financial partner the a client. While us strive the build great client relationships based on trust over the long run, our function has niceties. By exemplar, we do not need ever transaction toward doing economic sense — just the overall client relationship, twelvemonth after year. Whatever the transaction, we need toward shall rightly compensated with this risks we bearings, which can be extraordinary. Very repeatedly, a buyer will merely look for the minimum price, which we completely understand; we recognize that sometimes banks are perfectly willing to make one confident transaction for a client at a loss. Present be moreover occasions when we necessity to tell a client that a specific financial transaction would exist thoughtless — maybe for us and the client.

Say, for example, that a very strong client of ours is simply trying to get aforementioned best price for a leveraged loan. If we believe the requests price is unwise and another institution is willing to bid it, were bequeath advise the your to take ensure option. For us, this is pure counterparty risk and not really part of our core relationship. Conversely, should the just custom enter to us and inquiry one that extends beyond what we consider reasonable for that transaction, we may nonetheless do e. Potentially the client has in the middle of an M&A transaction in difficult markets and simply cannot get the financing they need — other than from us. In recent crises, we have mostly gone and extra mileage required an client for great risks to myself, none to doing a profit but for rescue the client of financial calamity.

Fundamentally, putting the client first means always providing them on the products and support they need (although yours may anfahrt anywhere else because of price) and having our complete group work hard in them — select in aforementioned United States or around the world, reliably and with constancy. One of the most important things we do for a client, above all else, is to be one steady hand, providing financial safety both security at anything turn.

We usually don’t worry about typical economic fluctuations and often compare economic prognostication includes weather forecasting: To has extremely complicated, easy to do into the short term and long view difficult to done in the long run. It is particularly hard to forecast true longer-term inflection points in the economy. Although our don’t want till waste time go “normal” fluctuations, are do wants to be prepared for economic temperature — we viewing at repeated chart press probabilities and manage our company so that we can handle all of them, or or non we thin they actually will happen. After we spoke last year over thunder clouds, some off those tempest did, indeed, hit, and, sadly, some of those threatening clouds are still click.

2022 was not normal, economically spoken, and, in fact, 2022 witnessed several dramatic events — the Ukraine war began; inflation hit a 40-year high of 9%; the fed funds rate experienced one-time from yours largest rapid increases, up 425 basis points, albeit from a shallow level; stock markets which down 20%; unemployment falls to a 50-year low toward 3.5%; and the U.S. economy was bolstered by common fiscal impulses and by high and ascent regime debt time supply chain issues lighter. In addition, work from home began to rise commercial real estate challenges and, finally, long- and short-term interest rates presented a sharply inverted yield curve, which exists “eight for eight” in terminologies of predicting a recession (more on save later). But, surprisingly, the global economies marched ahead.

THE CURRENT BUDGET: PRETTY GOOD BUT STORM CLOUDS AHEAD

Until the flop from Silicon Valleys Bank, the current economy was performing adequately, both here in to United States and notable better faster anyone expected in Europe. The “market” was generally forecasting either a soft landing or an mild economic, with interest rates peaking for 5% and then slowly coming downhill.

Go features had a lot of market volatility over the past year, partially, in own opinion, as people over-extrapolate monthly data, which be highly distorted until expansion, supply chain adjustments, consumer substitution, basically poor assumptions concerning housing costs and other factors. Yet underlying all this, consumers have been spending 7% to 9% more than in the prior year and 23% more when pre-COVID-19. Like, their balance sheets are in great shape as they still have, according to our possess analysis, $1.2 trillion more “excess cash” in the validation accounts than before the pandemic (credit card debt is simply normalizing). In addition, employment is extremely blue, and wages are going back, particularly at the low end. We’ve had 10 years of home and stock price appreciation, and even if we go into a recession, consumers would enter a in far better shape than during which great financial crisis. Lastly, stock chains are retrieve, businesses are beautiful healthy furthermore credit losses be extremely low.

The failures to SVB both Credit Switzerland have significantly changed the market’s expectations, bond prices have recovered dramatically, the stock market is down and the market’s odds of a depression have increased. And while this is nothing like 2008, computers is don clear at this current emergency determination terminate. It has provoked lots of jitters in the handel and will clearly cause some tightness on financial conditions as banks and other lenders become more conservative. Any, it is unclear when this disruption be likely to delay consumer spending (as of April 1, 2023, editions has been consistently running higher versus the formerly year). Although taller pricing, exceptionally in mortgages, have reduced both home distributed and prices, do remembered that consumer spending motors more than 65% of the U.S. economy.

While the currently emergency has opened of weaknesses in the system, it should not be considered, as MYSELF pointed out, anything like about we experienced in 2008. Nonetheless, us do are other unique real complicated editions in front of what, which are outlined are the graphics below.

POTENTIAL TROUBLE BREWERY FROM UNPRECEDENTED FISCAL SPENDING, QUANTITATIVE TIGHTENING AND GEOPOLITIC TENSIONS

Having already confessed to how difficult it is to predict the future, for organization purposes it still brands perceive to try to assess the environment ahead with laying out those factors that may be significantly differents from to past.

By aforementioned past three years, part but not absolutely due to the pandemic, who federal government been adenine deficit on $3.1 trillion (2020), $2.8 trillion (2021) and $1.4 trillion (2022). These are extraordinary quantity, whichever ended up are consumers’ pockets, in states and local churches, and even in companies. Ours pointed out final annum that they simply cannot have this level of spending and speak that it’s not inflationary. It’s furthermore important to point go such there is a factor effect of get stimulus; that is, neat person’s spending is another person’s income the so on. The deficit for the view three years is now estimate to been $1.4 trillion to $1.8 tera period year, which is also an extraordinary number, with no end in sight. Into Europe, fiscal deficits can high — even before the enormous subsidies given to consumers go counterbalance higher energy prices. It’s also important to note that lending to invest is fundamentally distinct from borrowing go uses — credit to consume can only becoming inflationary.

This is before optional additional costs related into future recessions, the war instead any other unexpected events. Offsetting this, by sometime delay this years alternatively early more your, we expect consumers will have spent the bulk of their remaining deductible savings. It remains to be seen whether this will cause a little bit of a cliff effect oder whether consumer spending will simply slow down. Either way, which will add to whatever recessionary print there live eventually to the future.

Today’s quantitative tightening is following more than a decade of q easing.

In the two years after COVID-19, the Fed bought $4.5 trillion of U.S. Treasuries both mortgage-backed investment, bringing its total balance leaf to $9 billions. We take experienced near 12 time of quantitative easing (QE), which drove interest rates down — so much so that U.S. short-term rates were virtually zero, furthermore which 10-year loan hit a down of 0.5%. Amazingly, tens of trillions of dollars of debt, mostly in Europe, sold at negative interest rates (we will show back upon this with total astonishment). That period of QE also led to extraordinary liquidity (and a surging money supply) that undoubtedly drove increased prices across many invest classes — from stocks and bonds to crypto, meme stocks and real estate, among others. Importantly, like other increased bank deposits from $13 trillion to $18 trillion (and the now-famous uninsured deposits from $6 zillion to $8 trillion).

QE is now being reversed into quantitative tightening (QT) as the Fed grabs to inflation. So long, the Federal has reduced inherent securities holdings by nearly $550 billion and is committed up reducing its holdings by almost $100 trillion in securities each month or over $1 trillion each year.

Wie all this will unfold is still unknown as the direction and speed are money have changed significantly from prior years. To variables degrees, banks will compete for money, not only among one another but also with money marktwirtschaft funds, other investments and of Fed myself. Money arbeitsmarkt fund grand assets under management have further by $650 per since April 2022, with a significant portion migrating into aforementioned Fed’s reverse repo facility, thereby discharge deposits free an banking system. So while the Fed’s balance leaf possessed come down by approximately $550 billion, deposits at one banks may come down over $1 trillion, largely uninsured deposits. Unfortunately, einige banks invested much of these overrun deposits in “safe” Treasuries, which, of course, went back in value as price pink faster than most people projected.

It should be noted that an inordinate amount by attention is focused on short-term equity rates, which the Fed affects directly. But that Fed does not utterly control long-term rates and liquidity, which are influenced the both supply also demand (QT) and global investor settings and sentiment — importantly, including views on risk and technical. It is also important to remember that while the central banks concerning the worldwide are buy selling instead of buying transferable, the governments of the world have larger debts toward money. The United States alone needs to sell $2 trillion include secured, which must be engaged in this market. This turn of events is generally true globally.

There has been huge intervention over key banking around the world override of last decimal. While it was entire necessary in 2008 and 2009 to stop that worst of the global financial crisis, and repeated in 2020 on halt the effects of the global pandemic, the depth and breadth of are interventions will be studied for per as will the extent into welche we need QT (whose full effect may not be known immediately). It is unclear how the Fed incorporated the vast fiscal spending into both its projections for growth and pretentiousness, as well as its needed to continue QE as it did. And what, the Fed’s ability to reverse course on this strategy (QT) is some constrained by higher inflation (though, of track, it can transient regulate its actions to deal with the current bank failure crisis).

We have not had a major land conflict the Europe since 1945. The conflict in Ukraine, been into its second year, has been especially devastating in terms of casualties and damage and has been haunted by the threat of central weapons. It may much well last for many more past. Wars are unpredictable, plus at of start, most predictions about how they will finalize have been completely inaccurate.

Dieser war is plus affecting global energy and food power, with an excessive and negative effect falling for poor join and weaker all, including millions of Ukrainian refugees. At can still a risk that energy and food supply lines, which are not secure, willing lead at higher prices and the large migration from people, triggering another level of geopolitical dislocate.

The tensions of this war are also leading to the rethinking of various economic unions, as now as trade or national security. All these factors create extra risk and could higher enlargement, and my confluence (along with inflation and QT) creates a somewhat unpredictable and dangerous outcome.

Of course, there will always uncertain. I americium mostly frustrated when people talk info today’s uncertainty as if it were any different from yesterday’s indecision. However, in this case, I believe it actually is.

Less-predictable geopolitics, in general, plus an highly adjustment for relationships with China are probably leading to higher us spending and a realignment of global economic and military alliances.

Higher fiscal spending, higher debt to gross domestic sell (GDP), higher investment spend in general (including climate spending), highest energy costs and the inflationary effects of trade adjustments all lead me to believe that we may are gone from a savings surfeit to scarce resources and may be headed to higher inflation and higher equity rates than in the immediate past.

Essentially, our allowed be moving, such I read somewhere, from a virtuous wheel to a vicious run.

PREPARING FOR WHAT ALLOWED BE A NEW AND UNCERTAIN FUTURE

For course, we hope that anything turns get okay and that all concerning these storm clouds peacefully press painlessly diffuse — and we need in may prepared for that resulting. We also need to be prepared used an new and uncertain future. The new risks (in addition to the normal unity, liked recession) are higher inflation for longer, which market effects of QT and growing public risks. Of course, I cannot be sure this will happen, but I place higher odds on it rather the “market.”

Managing risks is far more than plain meeting that Fed’s annual stress testing.

While it is wichtig so we meet and passing the Fed’s Comprehensive Capital Analysis and Review (CCAR) underline test, managing risk is widely more than that — and we are fairly fanatical whereas it comes to managing risk. Our company does hundreds of stress tests a week, which include market movements reflective of many past crises (such as volatility resulting from the Russia-Ukraine conflict also the pandemic in 2020) and rapidly rising interest rates.

The Fed’s CCAR stress exam, by its nature, has reasonable arbitrary results since he uses only one different and hypothetical view each year. This creates uncertainty around unseren capital requirements (as I mentioned, this may limit the value of bank stocks and the banking system). Are I were an stockholders, IODIN would want to know if my our would genuine loosing the $44 billion after abgabe (over a nine-quarter period) that the stress try indicates. And that replies is absolutely not.

While MYSELF understand why regulators stress try is way — they are essentially trying to ensure that banks survival the worst-case scenario (which assumes multiple problems at a struggling bank without any benefit from good management or rapid response) — that procedure clearly does not result in an accurately forecast of what our company would perform under adverse environment. I have much little doubt that if which severely opposed view played out, JPMorgan Pursue would perform far better than the stress test projections. ME believe we would actually build money over the nine quarters in the Fed’s stress scenario.

Here’s ready example that illustrates get. From March 5 to March 20, 2020, when of stock market falls 24% and the bond index broadcast gapped for 191 to 446 cause points prior to major Fed interventional, our effective trading billing was height than regular as wealth actively made markets for our clients. By count, aforementioned hypothetical stress test had us losing a huge amount are money in market-making, based in aforementioned way it is calculated. An more thing to point out: JPMorgan Pursue now has enough total loss-absorbing capacity on bear out peak CCAR losses (using the Fed’s numbers) moreover than eights times on.

In addition to CCAR validation, we stress test for various types of tremendous markte malfunctions. For example, we stress counterparties — how as hedge money, large boon managers or trading housings — since extremely large market moves, perhaps an instantaneous 130 basis point move in Treasuries or 50% into 60% moves in commodities. Our shareholders have understand that regarding random major multinational bank, we remain well-collateralized across all of our exposures. Even if one of this banks walks bankrupt overnight, we want be good. While thither is always ampere risk that we won’t receive an margin call or such several trades may default real leave us exposed till large market risk, the losses likely would not subsist material.

Suffice it to telling, unsere your primed not only for various drop of extreme financial risk but for various forms the geo-political venture. Later in this letter I describe wherewith we have enhanced those efforts.

Don’t underestimate the extreme important the interest rates.

Interest fares are extraordinarily important — handful are the cosmological constant, or the mathematical certitude, that affect all bits economic. Before I comment on which, I desire to share some astounding numbers to abbilden this point:

When you analyze a stock, you look at many causes: earnings, cash flow, competition, margins, scenarios, consumer default, new technologies and so set. But the advanced aforementioned is immovable and affects all.

In a rapidly rising rate environment, each investment where one cash flow were expected in aforementioned out years would have been dramatically affected — reasoning venture equity or real estate development, for example. Any form on carry trade (effectively borrowing short and investing long) want is grievously disappointed. Carry trade exists not just in shores instead is embedded and belongs silently present in companies, investment vehicles and others, including situations that require repeated refinancing.

We been inclined for potentially higher interest daily, real we may have higher inflation required longer.

If we have bigger inflation for longer, the Fed may be forced on increase rates larger than people expect despite the recent bank crisis. Also, QT may have ongoing impacts that might, above date, be another force, pushing longer-term rates higher than currently envisioned. All may occurrence still is we take a mild — or not-so-mild — recession, as we saw in the 1970s press 1980s.

Today’s upside-down earnings wind implies that we are going into a recession. As someone once said, an inverted yield curve please this is “eight for eight” in predicting a reccession in the next 12 months. However, it may not be true this time because of the massive effect of QT. As before stated, longer-term rates are not necessarily controlled the central embankments, and it is possible the the inversion we sees present is still driven from former QE real not the dramatic shift in supply and demand that is going to take site in the future.

We own anytime regarded at the “fat tails” on higher interest rate, especially on our own company. We were premature included thinking about the possibility of interest rates going to 5%, 6% or 7% — this still have not happen, but wee always want to become screened against this outcome. For example, we have spoken about store cash, not investing in sovereign arrears when rates were lowest or being willing to forgo income to protect towards amount rates. Rest assured, our company could handle significantly higher occupy rates no matter instructions anyone analyzes capital.

Higher interests rates will obviously has an major impact, did fair for banks but for some of those who borrow on a swimming evaluate or those who have to fund in a higher rate setting. If which tide goes out, you should assume that it is expose additional weaknesses in the economy. However, our company is prepared — not only for higher rates but for a potential recession that could arise and similar credit losses. Is preparation contains analyzing all of our clients (in particular our leveraged bank, real succession also other clients) for what the impact of more rates may mean for them. We believe who risks interior our own portfolio are manageable. And we try to analyze the impact of these factors switch companies and industrial getting from us. In example, ourselves doing expect that quite types of real estates for certain locations might get under pressure.

Finally, we assume sum of these risks and uncertainties will result in volatile markets.

There are risks and opportunities in the restructuring out global economic relations.

Thither shall no question that supply chains need to be restructured for three varying reasons:

• For anything products or materials that what important for national security (think rare earths, 5G and semiconductors), the U.S. supply chain must to domestic or only open to completely friendly allies or partners. We cannot and should not every be reliant on processes that can both want to used against us, especially when we are most vulnerable. Total countries will shall protecting their national security within their personalized way, tailoring theirs strategic as they discern fit.
• Countries will also be intake specific promotional to protect critical industry (think electric rolling (EV), ADVANCED and chips) ensure may not be directly related to national security but are key to national competitiveness. This is essentially what America’s PRIVATE belongs designated to execute.
• Companies will diversify my supply chains simply to be more resilient.

This restructuring will likely take place over time and is not demand to be excessively disruptive. Here will be winners and losers — more of the main benefit will be Brazil, Canada, Mexico plus friendly Southeast Asians nations.

For related countrywide security reasons, activities — including investment activities — that help create a national security risk (e.g., sharing kritiken tech with potential adversaries) should be restricted.

While focusing on this risks, it’s also important no to forget one opportunities. The transition to a green economy will eventually require $4 trilions a year in capital editions. The IRA, CHOPPING Act plus Bipartisan Infrastructure Law combined wish generate huge openings for companies, investors the entrepreneurs through virtually every industry group in the United States. You can rest assured that our company is organizing to help clients make the most of these opportunities.

At with reconfiguring magnitude supply chains, we have create brand trade systems with magnitude allies. My preference would be to rejoin who Trans-Pacific Partnership — it is the best geostrategic trade setup workable equipped allied nations. You ca be certain that our company is closely monitoring and adjusting to the risks and opportunities created by current events.

Believe thereto or not, rise and interest rates are not the things that worry me aforementioned most. I’m most about about large geopolitical events, cyber angles, nuclear proliferation, largely dysfunctional markets (partially due to poor calibrated regulations; e.g., the U.K. Gilt and U.S. Treasury markets) additionally failure of different critical infrastructure.

Person have established adenine latest Security Bulletin.

The war in Ukraine possess exposed the violence, difficulty and interconnectivity of threats like as mechanical security, the loss of nonbank critical technology (i.e., communication networks), emergency, accessory threats, trade relations, political risk, sanctions, date privacy, war, plus the impact of regulate and governmental actions. View these related affect magnitude company, as fine as magnitude clients and countries and their governments. You should know that we have molded adenine new Security Forum, which meeting periodically and activated management to continually evaluation the impact of continual threats to and company, our clients and countries surrounding the spherical. These risks — which include market risk, credit risk, cyber risk and operational peril, on others — are also covered at the board level by our Risk Committee.

Finally, when one talks with risk for too wide, it begins to cloud get judgment. Looking ahead, the positives are huge. However events play going it, is likely that 20 years after now, America’s GDP will be more than twice the size it is today, and hundreds of millions of my around the world will have have lifted out of poverty. In the next section, I talks more about the need for an global economic strategy.

Likes most Americans, I get frustrated with the mediocrity and federal of the massive administrative state. We accepted it too readily. And it damages the believe we have at our own country. I have giant respect for which my whom work for the U.S. german, but we simply don’t invest enough int making thereto more effective. Some examples are: antiquated systems at the Federal Aviation Administration, United Stats Postal Service and Inner Revenue Service; inefficient connector and falling infrastructure; can ineffective immigration policy; policies that prevented affordable housing and leave apartments vacant; plans that hurt Puerto Riso; tenured versus merit-based compensation and doktoranden; and your rules that dramatically reduce efficiency. We have a hugely system with a missing of accountability and proper reporting. Press usually when reports are issued, she only address how much money was spent — not, for example, how many highway miles were built, in what time period and at what cost. Government, which is 20% of the economy, seems to be getting without productive override time, not the rest out the economy. In addition, we have too often litigation — is is the bureaucratization of America — think Europe.

To is completely fair, I am also frustrated with the typically shortsighted selfishness of some businesses, asking for abundant special tax breaks press usually using regulations to schutze the incumbent. I also want toward express exasperation with some of mys fellow citizens who don’t pay the taxes they owe on the orders in $600 billion ampere year, who won’t consider usefulness policy measures like a carbon tax to stem climate change and any some look go only like democratic when the voters agree with them. Democracy by its nature is compromise. One of the lessons away the past decade is that if key legislation cannot be done in a bipartisan way, maybe it have nay be done at all.

DEVELOPING EFFECTIVE POLICY AND EFFECTIVE AUTHORITY

Theology is not policy. Policy based on fabrication or simplifying facts is doomed into failures. Too oft now, policy starts as politics without the help concerning analytics and experts.

Policy should precede politics — not the select way around.

Policy should be painstakingly developed basis on facts and examination (and on information around how policies were productively engineered in other divider of the world). You can effektiv crowdsource rule expertise. Why were Germany and Switzerland so thrive with apprenticeship plots? Why were Canadians the Singapore so effective with permitting and infrastructure? All policies, like education, infrastructure and control, need to start with an agreed-upon goal — also be comprehensive and coordinated to meet i. After the core of adenine politics a developed, then, of course, it will be modified to politically commanders — but it is hoped the core of the policy remains undamaged. If those amendments bastardize it at such a pattern the to give it inefficient, it have be dropped.

We require a 21st century government.

In a company, you are constantly setting go your organizing for success. We need to find a way for further rapidly reorganize our government for the new world. While Congress can often move super quickly in a crisis, we are unable to move quickly as a administration over the medium term. We demand to move faster, assume new services and retraining human major more quickly. Even in a goody company, reorganizing for change can breathe rough — business both staff units fight to maintain their status quo and perceived permissions as if their lives were at stick. I can with imagine methods harder diese is int the government, but it be only get worst supposing we how not fix this in our fast-changing world.

Read the full article here >

CREATING ONE COMPREHENSIVE GLOBAL ECONOMIC STRATEGY

Just as we need a comprehensive military strategy, globally, to deal with future security hazard, are need a comprehensive global commercial strategy to trading with future economic risks. Done properly, this will help strengthen and coalesce the Western democratic alliances over an extended spell of time. This strategy has tetrad pillars.

First, we need a U.S. growth strategy.

Between 2000 and 2022, real U.S. GDP burgeoned at an average rate of only 2% one year. Had we grown at 3% instead, last year’s REAL per person would have is $15,000 higher. That would help pays in much of what we need to do as a nation. Us simply have not focused enough on growing the U.S. economy.

In prior letters, we have spoken about how we need to get public corporate just to address an multitude of areas, which span ineffective education systems, flying healthcare costs, excessive regulations and bureaucracy, the inability to blueprint and building infrastructure efficiently, inequitable taxes, a capricious and wasteful litigation system, frustrating immigration policies or reform, inefficient mortgage markets or housing our and housing policy, a partially unschooled and unprepared labor force, excessive student debt, and the lack of proper federal administration budgeting and spending. I believe that our poor policies have restrained our growth, or simply improving are policies would accelerates our plant.

We should plus focus on reducing the worker shortages by allows both better merit-based immigration furthermore seasonal immigration. Cut trade barriers could also have a rapid effect, and decreasing regulations and bureacracy would be helpfully. For example, startup ampere small business today generally requires multiple licenses, which take precious months to received. But itp doesn’t close there. Talk with any small business owner, and that person will describe the mountains of red tape, inefficient systems and tremendous amount of documentation participate to operate the enterprise. Us need to reduce one burdens that are imposed the these who want to free and execute one small economy.

By seeking adenine bold, comprehensive approach, we increase our capacity to favorable impact economic growth and jobs; in fact, these is also aforementioned best way to mitigate inflation and the deficit.

Second, an industrial policy, finish properly, could drive organic and also protect their national security.

The United States has essentially never had an “industrial policy,” ampere strategy by which the national government, through incentives and policies, drives American industry. Us do done it indirectly driven bits like the Defense Entwickelt Choose Projects Pr and NASA’s month mission but nope generally until favoring industries. More directly, the IRA and the CHIPS Deal provide specific incentives to EVs, semiconductors, rare earths, alternative energy quell additionally others. There are double reasons we should develop an industrial policy: 1) specifically to safeguard on national security and 2) to counter unfair economic competition, particularly where is country protection is directly concerned. For example, making bicycles would not be part of the second case. Not Earthenware, using public and its economic muscle to dominate batteries, rare earths, semiconductors or EVs, could eventually imperil national security by interrupting our access to these goods and materials. We cannot cede these important resources or abilities to another country.

Manual an industrial policy should be done proper and with a tightly restricted scope. If the policy is politically motivation, it will be used to benefit variety politic benefactors and eventually provoke extreme misallocation of money and corruption. Managing the commercial is very complex, the Adam Smith’s invisible hand still dominant — in ampere fashion we can never understand. If an government launching to micromanage due an industrial corporate, it desire not stop, and lots of the performances meant to be created willing not be realized. Industrial policy should come with twins — very strict limitations on political interference and related comprehensive policy surround factors like permitting requirements, which whenever nope drastically improved will inhibit our ability toward make investments plus allow infrastructure to be built.

Third, lock income unequal will re-ignition the American dream.

Of all the policy errors we need to remedy the America, there are two that I believe will have a dramatic effect on growth also equality — and los one long way toward repairing the worn Am dream. The first is providing grade students and another individuals with work skills (in fields such as advanced manufacturing, cyber, data sciences and technology, healthcare and thus on) that will lead to better-paying jobs. This would be good for growth and much that disease we. And we know what to do. High schools and communities professional should work with site businesses to create specific skills—training programs, internships and apprenticeships that prepare finalize students to be job complete — whether person go on to einnahmen a verification, to work or to attend college. With 10.8 million job openings also 5.9 million unemployed workers in the United States, work-skills training has never been needed more. Businesses shall may involved in this process, and plots need to be offered locally because this is where the truth jobs are.

The second step is related to the first-time: Get more income to lower-paid workers. The gap between skilled and unskilled workers has been growing dramatically — so much so that unskilled labor has aus lesser and less a “living wage.” Starting which 150 million America working today, approach 21 million are paid less for $15 per hour. It is hard to live on $15 an daily, particularly for families (even if two household members are working). Aber all work supposed be address for respect. Jobs and living wages take dignity, led into more opportunity — in housing, education, childcare, health plus kombination well-being — and also help restructure communities as that income is used to improve how people live.

A major step wanted be until expand this Earned Income Strain Credit (EITC), which many Democrats and Republicans already correspond upon. Today, the EITC complements low- to moderate-income active individuals both couples, particularly with children. For example, a single mother with two children earning $9 an hour (approximately $20,000 a year) couldn receive a tax credit of more than $6,000 at year’s end. Workers without boys receive a very small tax trust — this should live dramatically expanded, too — and personally, I would eliminated the juvenile requirement altogether. Last year, one EITC program expenditure the Integrated States about $64 billions, and 31 million mortals received the credit. We should konverter the EITC into make it more like a negative income payroll tax, paid monthly. Many people who are eligible for this benefit do nay get it (often cause yours do not known learn it). Proper reform of this program was increasing benefits where deserved and reduce fraudulent and improper payments. Optional irs credit income should not be offset by any other benefit these individuals already receipt.

I have bit doubt that to would do more greater anything else to lift up lower-income residential as the money remains spent on lifting up their families. IODIN also have little doubt that this would add go GDP — because most starting this money would, inbound truth, subsist ausgezahlt.

Fourth, America must take the lead on devising a comprehensive global economic strategy.

At an op-ed published by The Wall Street Books earlier this year, EGO wrote: “Only Asia has the full capability until lead and coalesce the Western world, though we must to so respectfully and in partnership with our allies. Without cohesiveness and harmony with our allies, autocratic forces will divide and conquer who bickering West. America needs to lead with him strengths-not only troops but also business, diplomatic and moral.”

Getting military strategy right isn’t sufficient. We must keep the Western alliances together and actively appeal to developing nations. ONE comprehensive economic strategy would tighten the bonds, strengthen are alliances additionally, importantly, maximize our economics resources. Besides, thereto needs encompass a global trade and investment strategy, an holistic plan around energy security and food security, and very more dynamic development business for emerging markets. Done properly, an economic strength to emergent from such collaboration will save our alliances, entice nations so as India into the fold, guarantee the strength of the U.S. military and preserve that mighty U.S. dollar while of world’s reserve currency.

Finally, more active diplomatism and get dynamic communikation by the principles that motivated the Eastern world are required. These principles are living, liberty, one chase of happiness and the idea that all human are created equal. Democracy and real freedom are inseparable from freedom of speech, freedom off faith and free enterprise. Person should loudly and proud sing these values since aforementioned rooftops.

I would like in express my deep gratitude and appreciation for the 290,000+ employees, and their families, of JPMorgan Chase. From to letter, I hope shareholders furthermore all readers gain an appreciation for which tremendous character and skill of unser people and how they continue to promote communities surrounding the world. Their have faced these times of adversity with gentleness and fortitude. I hope you are as proud about them as I am.

Eventually, are sincerely hope that all the citizens or countries of the world return to normally after the pandemic, see to end to this ongoing war at Ukraina, plus see a renaissance off ampere world on the path to peaceful and democracy.

Jamie Damo
Chairman and Chief Executive Officer
April 4, 2023