‘Greed price spiral’: Bank to surpass $1 trillion in value despite cost of living crisis

A bank is set to surpass $1 trillion in its valuation thanks to the “soft economy”, as big businesses are being criticised for raking in profits despite the looming global recession.

Yet another bank is set to benefit from the cost of living crisis while regular punters worldwide struggle to keep a roof over their heads as a global recession looms.

Multinational investment bank JP Morgan Chase & Co, which has headquarters in the US and offers services in Australia and the wider world, is predicted to have an eye-watering market capitalisation of US$1 trillion (AU$1.48 trillion) by 2030.

And the bank can thank rising interest rates and inflation for the record valuation it’s expected to hit in seven years.

Analysis from rival investment management firm Morgan Stanley made the prediction.

They noted that JP Morgan would achieve the record-breaking market cap by 2035 if interest rates stay where they are now.

However, it’s entirely possible that the banking conglomerate could get there by 2030 if the economy continues to soften and interest rates continue to rise, which would allow JP Morgan to increase its revenue growth.

The revelation comes as a blistering analysis from the Australian Institute found that excessive corporate profits contributed to the cost of living crisis.

JP Morgan Chase & Co is going to reach a new milestone as early as 2030. Picture: Timothy Clary / AFP

For context, a AU$1.48 trillion market cap is an insane amount of money.

At its peak in 2021, Australia’s property market — where most of Australia’s wealth sits — hit AU$9 trillion in valuation.

That means a single company would hold more than a ninth of the value of Australia’s largest avenue for investment.

JPMorgan currently holds a market cap of at $US410 billion (A$609 billion).

It has already risen by four per cent so far this year, according to Bloomberg.

At the moment, only four companies in the world are valued at more than US$1 trillion.

Those are Apple, Microsoft, Saudi Aramco (a Saudi oil company) and Alphabet (Google’s parent company).

Earlier this week, mega Australian business copped criticism for raking in record profits as they squeeze customers in what was dubbed as a “greed-price spiral”.

Some big businesses have been accused of passing on costs to customers at too high a rate, leading to profit margins growing at customers’ expense.

A brutal analysis from the Australian Institute released on Friday found that Australia’s inflation would have stayed within the Reserve Bank of Australia’s (RBA) target if companies had not squeezed consumers through the pandemic via excess price hikes.

The “dramatic expansion” of business profits has gone mostly ignored by the RBA, which has instead focused on a supposed wage-price spiral that does not exist, Dr Jim Stanford from the Australian Institute claimed.

For instance, this week, Qantas announced a $1.4 billion profit, supermarket giant Woolworths revealed a $907 million profit – up by 14 per cent – and fellow grocery juggernaut Coles revealed a $643 million profit, which grew by 17.1 per cent.

It also came hot on the heels of the Commonwealth Bank’s recently reported record $5.15 billion profit – up by 9 per cent.

The RBA’s obsession with wage restraint – essentially urging Australians to cop a pay decrease – is “misplaced and unfair” and interest rates would be far lower if companies had not “gouged customers” at the checkout, its analysis showed.

Australian businesses increased prices by a total of $160 billion per year, which was far more than necessary to cover rising expenses for labour, taxes and supply chain issues, the Australian Institute found.

These four Australian businesses made record profits and were heavily criticised.

ACTU Secretary Sally McManus said what was occurring was a “greed-price spiral”.

“Qantas has joined Coles and Woolworths, as well as the Commonwealth Bank, in posting eye-watering profits. Inflation is being fed by these companies putting up prices far more than they need to,” she said.

“Wage growth is clearly not contributing to inflation. Any wage rises in 2022 and early 2023 have been eaten up by price rises and interest rate rises.

“Real wages are going backwards, a shocking 4.5 per cent. More needs to be done to get wages moving.”

— With Sarah Sharples

Originally published as ‘Greed price spiral’: Bank to surpass $1 trillion in value despite cost of living crisis