Jamie Dimon Says Corporations Will Fund Buybacks With Tax Cuts And That's "Not A Bad Thing"

For at least half a decade now (How The Fed's Visible Hand Is Forcing Corporate Cash Mismanagement) we have warned about how the Fed’s flawed approach to monetary policy incentivizes corporations to fund share buybacks with massive amounts of debt...

…While the corporate sector has spent record sums on share buybacks...

Capex has experienced an unprecedented decline...

 

Of course, some Democrats have argued that the Trump tax plan will perpetuate essentially the same incentives as corporate tax rates are slashed and money brought back from overseas is spent on still more buybacks, instead of creating jobs and capital expenditures, like the Republicans argue it will be.

The flimsiness of the GOP’s argument was exposed a few weeks ago during a memorable gaffe involving NEC Chief (and former No. 2 at Goldman Sachs) Gary Cohn, one of two officials managing the tax bill on behalf of the White House – the other being Treasury Secretary Steven Mnuchin, also a former Goldmanite.

During an event for the Wall Street Journal's CEO Council, an editor at The Wall Street Journal asked the room: "If the tax reform bill goes through, do you plan to increase investment - your company's investment, capital investment?"

 

He asked for a show of hands.

 

Alas, as the camera revealed, virtually nobody raised their hand.

 

Responding to this "unexpected" lack of enthusiasm to invest in growth, Cohn had one question: "Why aren't the other hands up?

While Cohn’s dismay at the lack of enthusiasm for his tax plan was obvious and embarrassing (the clip was in heavy rotation on CNBC for much of the next day), the fact that corporations will spend the windfall created by the tax bill isn’t necessarily a bad thing, according to JP Morgan Chase CEO Jamie Dimon.

Of course it wouldn’t be “a bad thing” – for Jamie.

When it comes to the rest of us…well…maybe not so much.

Dimon, who was speaking at a conference in Ann Arbor, Michigan hosted by Axios, according to CNBC.

According to Dimon’s logic, repatriations enabled by the tax plan could swiftly lead to more than $1 trillion being brought back from overseas. It doesn’t matter where that money goes, the point is there will be more capital sloshing around the domestic economy…and that will eventually manifest itself in the form of capex, job creation and higher wages…

"You need a competitive tax system ... companies will retain more capital and start to use it over time," Dimon said Wednesday in response to a moderator question at the Axios Smarter Faster Revolution event in Ann Arbor, Michigan.

 

"Some will raise wages. Some will buy companies. Some may do dividends and buybacks. Don't act like that is a bad thing. That is their money. Think of it as a QE4. That money gets recirculated in the American system."

Dimon said tax reform "simply needs to be done," and should have happened 15 years ago. And while the benefits aren’t “going to be immediate”, they will accelerate growth “cumulatively over time."

JPMorgan's Jamie Dimon: Tax reform bill will result in more jobs from CNBC.

 

After the bill passes "probably a trillion dollars will come back from overseas," he added. "Cumulatively over time that will accelerate growth in the American economy." That effect will resemble something like QE4, though we’re not sure that’s the best comparison...

The real question is: Will the tax bill somehow prevent the Federal Reserve from needing to launch QE4 before the end of Trump’s first term. If you believe a recent Treasury Department analysis of the Senate tax plan released earlier this week.

That plan calcuated that the tax cuts would bolster US economic growth to an average rate of 2.9% real growth over the next 10 years...

...which would make the current economic expansion the longest in modern history...

...But then again, if you believe that, then we have some condos for you to buy.

Comments

Endgame Napoleon HRClinton Wed, 12/13/2017 - 20:13 Permalink

Tax breaks also should be contingent on companies hiring American citizens instead of welfare-funded border jumpers. It should be contingent on creating X number of full-time jobs, not just temp jobs and 1099 gigs. Employers getting the tax cut should not be able to staff with 98% mom workers, working part-time because of spousal income or monthly welfare that covers their rent and groceries and a child tax credit, which tops out at $6,444. That said, he is right that, if 1 trillion actually comes back here from overseas, that type of revenue infusion should do something.

Something.

In reply to by HRClinton

Atomizer Wed, 12/13/2017 - 20:10 Permalink

Fuck off Jamie, your sitting on a enormous derivatives pile of toxic shit. Are you mentally handicapped challenged? We see the books Jamie. Stop lying. 

Endgame Napoleon Atomizer Wed, 12/13/2017 - 20:28 Permalink

The world was a better place when the moms sported their “Tupperware hair dos” mostly at home, not on the sex-gossip news, and everyone could afford a home because the wage pool was not diluted at the bottom by twice as many workers chasing low-wage jobs. Nor was the wealth concentrated at the top due to assortative mates in their Barbie Dream Houses.

In reply to by Atomizer

Lost in translation Wed, 12/13/2017 - 20:26 Permalink

Dimon produces nothing of value, is a parasite, and an overconfident narcissist.

I suspect that one day and without warning, his security detail will suddenly turn on him, and put a few .40 slugs in the back of his brain.

Hell is patiently waiting for you, Jamie...

gregga777 Wed, 12/13/2017 - 20:32 Permalink

POS scumbag Jamie Dimon and his merry scumbags, as well as the Golem Sachs POS scumbags, would be perfectly happy with raking in profits from the renewed African slave trade, illegal drug dealing, money laundering, bid rigging in so-called "markets" and any other sort of illegal enterprises. I'd be perfectly happy seeing them all drawn and quartered.

The_Dude Wed, 12/13/2017 - 20:34 Permalink

Again, companies buy back stock when they have low borrowing costs (cheap cash) and no investment opportunities to meet a reasonable ROI.  In a low growth environment, this is expected.  Jamie loves it because he supplies the heroin (cheap cash).Make the money more expensive or increase growth in the economy and they will go back to investing.  Outside of this, expect more of the same. At least until they borrow so much they can't carry it any longer and default.

Blue Dog Wed, 12/13/2017 - 20:39 Permalink

The big corporations will use tax cuts to buy back their own stock at insanely high levels thereby shafting the stockholder. Buying back their own stock makes their earnings per share numbers look better.

alphasammae Wed, 12/13/2017 - 20:42 Permalink

Dimon and another pile of BS. How many billions will end up in your personal coffers after the tax plan is implemented?Main Street does not need more stock bubbles with all the free fiat money used to buy more shares for insiders! We do not need just more jobs but much higher wages to stimulate spending and compensate for hidden inflation made through the digital manipulation of precious metals by banksters. Bitcoin will be your nemesis. 

Atomizer Wed, 12/13/2017 - 20:57 Permalink

HUMANOID SOPHIA SPEAKS ON HER FEELINGS ABOUT GOD AND ...Look to right side, gray fleece hiding something. I can plainly see the power stick. This guy has no clue. If he brings in open source, they bitch will get fried. Garbage in, garbage out. 

Agree with the poster. It's all a scripted interview. Someone at computer is pressing the return button after question is asked. If you watched other videos, they have her hooked up to a WiFi connection. This one, hard wired.  

This cloud based bitch who is a citizen of Saudi Arabia will have her brain wiped out.

JustPastPeacefield Wed, 12/13/2017 - 22:35 Permalink

Give the corporate titans a tax break so they can inflate their stock options just a little more. Less tax revenue, more government debt.  Future generations will pay for it - one way or another.As if QE wasn't a big enough wealth transfer from the middle class to the rich - especially the super-rich. Somebody needs to wipe the slimy smile off the face of that fucking Dimon.