Flood of Warnings... Bernanke "Must Watch War, Strong Dollar, etc." (Comprehensive)

Former U.S. Federal Reserve Chairman Ben Bernanke
[Photo by Yonhap News]

[Asia Economy New York=Special Correspondent Seulgina Cho] Ben Bernanke, former chairman of the U.S. Federal Reserve (Fed) and co-recipient of this year's Nobel Prize in Economics, warned to closely monitor risk factors arising worldwide due to war and the strong dollar. Jamie Dimon, chairman of JP Morgan Chase, known as the "Emperor of Wall Street," also predicted that both the U.S. and global economies will enter a recession next year amid overlapping adverse factors.

As the possibility of an escalation in Russia's invasion of Ukraine emerges and major countries simultaneously continue high-intensity tightening, warnings of a global economic winter are erupting everywhere.

◆Bernanke Worried About War and Strong Dollar

At a press conference related to the Nobel Prize in Economics held on the 10th (local time) at the Brookings Institution in Washington DC, former Chairman Bernanke stated, "The U.S. financial system is not in as severe a predicament as it was 14 years ago," but also pointed out, "Various events occurring worldwide could worsen financial conditions." He warned that incidents in regions such as Europe and Asia could shake not only the U.S. but the global economy.

In particular, Bernanke cited Russia's invasion of Ukraine and the ultra-strong U.S. dollar as concerns. The prolonged Russian invasion is causing economic ripple effects in the European market, such as disruptions in natural gas supply. Additionally, the strong dollar is raising concerns about international capital outflows from emerging markets like Asia.

He emphasized, "Even if financial problems do not start from a single event, over time they can compound issues and worsen the situation," adding, "This is an aspect we really need to watch closely."

Bernanke, who led the Fed from 2006 to 2014, is known for implementing zero interest rates and quantitative easing policies in response to the global financial crisis.

This year's Nobel Prize in Economics was jointly awarded to Bernanke, Douglas Diamond, a professor at the University of Chicago, and Philip Dybvig, a professor at Washington University in St. Louis.

Professor Diamond pointed out at a separate press conference that day, "During times of rapid global interest rate hikes and unexpected events, fear can spread," and "Even organized systems are vulnerable to fear itself."

◆Dimon: "Recession Coming Within 6-9 Months"

Jamie Dimon, Chairman of JPMorgan Chase [Photo by Reuters]

Earlier, Dimon, who had warned that "a hurricane is approaching," also expressed pessimism about the future economic situation. At a conference held in London that day, he stated, "Europe is already in a recession. Because of this, the U.S. economy will also enter a recession within 6 to 9 months." The adverse factors Dimon cited include soaring inflation, steeper-than-expected interest rate hikes, unknown effects of quantitative easing (QE), and Russia's invasion of Ukraine.

Dimon said that while it is unknown how long the recession will last, it is certain that market volatility will increase. He also predicted that the S&P 500 index on the New York Stock Exchange could fall an additional 20% from its current level. The S&P 500 index has fallen about 24% so far this year.

These warnings are particularly notable as concerns about recession are growing amid high-intensity tightening by the Fed and other central banks worldwide. The Fed, which has implemented three consecutive giant steps (raising interest rates by 0.75 percentage points each time), is expected to raise rates sharply again in November. According to the Fed's recently released dot plot, the median interest rate by the end of this year is 4.4%.

Cash Wood, CEO of Ark Investment, well known domestically as the so-called "Money Tree Sister," strongly criticized the Fed's policy failures in an open letter that day.

She pointed out, "The Fed's rapid interest rate hikes are destroying the global economy," and "In the process of curbing inflation through high-intensity tightening, the risk of deflation is actually increasing." She argued that despite massive excess inventory, the Fed's focus solely on employment and inflation indicators increases the possibility of policy mistakes. Walmart and Target's inventories have increased by 25.5% and 36.1%, respectively.

This content was produced with the assistance of AI translation services.