JP Morgan's TERRIFYING Prediction Of AI COLLAPSE

Added: 2026-05-28

[00:00:00]The French economy and the Euro zone as a whole has just put out some of the worst economic data we've seen in years as the central European bank is rolling the pitch getting ready for rate hikes which threaten to harm the demand side of Europe's economy even further. And Jamie Diamond of JP Morgan is spreading huge amounts of fear with his predictions of mass layoffs across the entire world due to AI along with interest rates hikes in the US for the next decade which will be characterized by expensive capital, expensive debt and a credit crisis. All to be covered today on Stoic Finance with me, your host Max.

[00:00:33]And if you want to stay up to date on the financial news the legacy media won't show you, like and comment under this video so the algorithm shows you my future videos. And of course, subscribe to the channel as well.

[00:00:43]Business activity in the euro shrank at the quickest pace in two and a half years, adding to fears that the Iran war and accompany insurgent energy costs are dealing a severe blow to the economy.

[00:00:53]The composite purchasing managers index compiled by S&P fell to 47.5 in May from 48.8 in April, holding below the 50 threshold, separating growth from contraction for a second month. uh analysts had anticipated an unchanged reading but that was overly optimistic and you can see the graph right here.

[00:01:14]The uh orange line is the composite. So both services and manufacturing combined together below this 50 mark here. This line means the economy is contracting and as you can see services have dropped right off a cliff with this black line.

[00:01:27]Manufacturing has jumped up only positive in the last couple of months but not for the reason you might expect.

[00:01:33]Once again, manufacturing grew thanks to precautionary stock building, whilst the services sector slumped. Among the region's top two economies, Germany's composite reading was more or less stable, whilst France plunged to the lowest level since 2020. Price pressures, meanwhile, continue to build with input costs and goods and services and prices both surging at the fastest rate in more than three years. The rise in the survey's price gauges already hints at inflation running close to 4% in coming months. That combined with the growing signs of the region slipping into an economic downturn creates a deepening dilemma for policy makers.

[00:02:06]Europe's economy is weakening in the face of the faster inflation and sag in sentiment caused by the Middle East in the conflict. There could be further headwinds for the 21 nation block as the ECB moles raising interest rates to counter upward pricing pressure. So on the surface we'll be forgiven for at first sight thinking that this data might not actually be as bad as headlines suggest. After all, manufacturing PMI is still growing over the last couple of months, although it is now falling. The problem is that the manufacturing sector in Europe as a whole isn't doing well at all. Not this year and not in the years prior. It's been a declining market for the entirety of the last three or four years. It's only seen a momentary boon over the last couple of months because firms are stockpiling up on goods now in preparation for a much worse rest of the year as a result of the Iran war. And the growth we're seeing in manufacturing is just pulled forward from the future.

[00:02:57]Meaning the decline in the future is going to be far more aggressive and growth today is basically a red herring and not expected to continue. And then when you take a look at services PMI which doesn't face the same rush for stockpiling as a result of the Iran war, the situation gets much much worse. It is deeply negative with cost pressures and sentiment in particular really bad and services has been the only source of growth within the Euro zone ever since co. So a falling services industry means an economy that is falling as well. The other issue here is instinctively when we think of the Euro zone, we think of the big countries like Italy and Germany and France and Spain as an example. All of whom are reasonably well-developed and have struggled to see any real economic growth over the last decade or so. But the average of the Euro zone is dragged up by countries like Poland and even Greece who are actually growing really quite rapidly just from a much poorer starting point. So again, the headline figure in terms of change from before to today is much worse for the big important countries than the data alone would suggest.

[00:04:01]French business activity shrank at the quickest pace in 5 and a half years as higher energy prices hit consumers and firms. S&P's index sank to 43.5 in May from 47.6 in April, holding below the 50 mark, separating expansion from construction for a fifth month. Again, analysis analysts from Bloomberg had anticipated an improvement, and they got the polar opposite. The manufacturing and services gauges both plunged with companies saying the Iran war is pushing up fuel and energy costs and causing more general economic angst. And here's the graph specific for the PMI index for France. And you see that actually the composite number, the orange one here, has only been positive one month in 2024, another in latter 2024, and then once at the end of 2025 as well. It's been downhill for years. This shock has materially lifted recession risks for the Euro zone's second largest economy, describing the numbers as dire. So when we focus in on the most important, the largest economies in Europe, like France, this is the worst the economy has been since the height of the COVID lockdowns and a recession is looking completely imminent. And yes, the Iran war is having an impact. But France's PMI has been shrinking for, I think, 21 out of the last 24 months, long before Iran ever took its toll, showing that this isn't just a temporary issue, it's structural.

[00:05:25]There's a high probability that the European Central Bank will raise borrowing costs next month if the Iran war doesn't end in the meantime.

[00:05:31]According to governing council member Pierre W, the conflict has left the ECB at the beginning of an inflation problem. He described market bets for three/arter point increases in interest rates this year as reasonable. If the conflict isn't resolved by June, then I think the likelihood of a hike is quite high. At some point, we will have to react because we are already at 3% inflation. Again, you can see the graph here. Composite PMI negative across the entirety of the Euro zone and inflation ticking up massively over the last couple of months. It was around about their target for the majority of the last couple of years and it's exploding upwards. Officials are trying to decide whether the price pressures unleashed by the war warrant higher rates despite the conflict also presenting a headwind to economic expansion. Whilst analysts and investors are betting on a move next month, several policy makers don't yet appear to have made up their minds. So to make matters even worse for Europe, the inflation risk from Iran is worrying the ECB to the point where they are now fully expected to make multiple rate hikes this year, hurting the economy even further. And it isn't just Europe expecting this. Central banks all over the world are preparing for rate hikes to try and tame inflation. Now on this, I have to admit I am really quite conflicted and I'm not convinced at all that rate hikes are the right policy directive in response to a supply side energy shock. The inflation from the Iran war will likely be temporary and ease once the hormone straight opens back up. But the hit to demand in an economy from rate hikes will be really severe at a time where the economy is already hurting. And I do struggle to see the value in tanking demand on purpose to try and fix problems arising from a supply side issue. Energy in particular is notably volatile. Petrol prices go up when there's a crisis, but they come back down once that crisis ends. So I do wonder if the people would be better served by central banks that don't see interest rate or monetary policy as the single tool to fix every problem. And I guess this really goes back to the root cause of what is the role of a central bank and should it have you know closer cooperation with fiscal policy those in charge of the actual government and not focus entirely on monetary for instance why not try and fasttrack oil and gas exploration? Why not stick extra subsidies or remove taxes on other forms of energy generation? Why not cut the taxes charged on petrol at the pump? As an example, in the UK where I live, about 60% of the cost of petrol or diesel right now goes straight to the government in the form of fuel duty and value added tax. So both different forms of taxation. And when the rising cost of petrol is contributing so massively to inflation, would the country not be better served trying to fight that inflation by just cutting the tax revenue the government collects from the inflation instead of actively trying to harm the economy and dampen demand through raising interest rates. Prices in the UK have gone from about 135 pit for petrol to 160 pit for petrol. Again, for the last month or so, the government charges 53 p per liter in fuel duty. So, if they just cut that that fuel duty, not even included the value added tax, the other tax on top of the cost of petrol. If they just cut fuel duty by 50%, that brings the price of petrol back down to where it was before the war and it completely negates the effect of petrol on inflation. So, the debate around the role of central banks is obviously getting a lot of attention recently, and it's easy to see why. They have routinely failed in their mandates over the last decade and I don't think they're helping as much as they're harming. To be perfectly honest, Jamie Diamond said interest rate climbs may go much higher from current levels.

[00:09:10]A warning to bond investors at a time when yields have touched multi-year highs. They could be much higher than they are today. We may have gone from a saving glut to not enough savings.

[00:09:19]Diamond's view comes as longdated bonds have come under pressure and concern that higher oil prices may compel central banks to raise interest rates.

[00:09:26]Add in worries over government spending in Japan, the UK, and the US, as well as an artificial intelligence boom supporting growth in the world's biggest economy, and investors have been seeking greater compensation to own longer maturity debt.

[00:09:38]Bond rates can go up. The notion that somehow people say they will never go up is the wrong notion. Companies like us prepare for higher and lower rates.

[00:09:46]Yields on 30-year treasuries rose to levels last seen in 2007 this week, while the rate on two-year securities climbed to the highest since February 2025. The moves reflect investors worries about the inflationary impact of the Iran war and deficit risks in the world's biggest economies. And of course, that same impact is being seen across the rest of the world. US government debt is $30 trillion. The average rate is 3.5%. Even today, they can't possibly refinance it lower than that rate. They have another two trillion to do this year. But the thing is, we don't know when. We don't know when the world gets too scared about that. When inflation makes it where people don't want to earn long-term uh duration securities, rates can easily go up more and credit spreads can go up more. At one point, you're going to have lots of people having to refinance at higher rates. So, the risk of a complete collapse of the credit market is getting really severe. Even when there isn't a war on or there aren't supply side shocks sending inflation even higher, most developed economies are really struggling to get inflation down to that 2% target. So rates sitting at a bare minimum of say 3% or so for years to come seems almost a certainty. And with literally trillions of dollars of refinancing to be done for countries, for companies, even individuals on things like mortgages or car loans, it's hard to see how any advanced economy is on a sustainable path right now.

[00:11:07]Jamie Diamond said, "JP Morgan will likely hire more AI specialists and fewer traditional bankers as the adoption of the technology accelerates.

[00:11:15]I think will reduce our jobs down the road. There will be all different types of jobs and I think we will be hiring more AI people and fewer bankers in certain categories and it will make them more productive. Diamond's comments underscore a broader industry pivot towards automation that is reshaping the global financial workforce. As AI spreads across Wall Street, lenders are racing to boost productivity and streamline operations while navigating the potential political and social backlash triggered by job cuts. So Diamond is also pushing this same line as every other large company in America right now that AI will cause disruptions to our workforce that things that used to be jobs will be replaced with AI and there is a lot of fear surrounding this in particular. Now to be perfectly honest personally I'm far less worried about this than the risk to the credit markets. Humans have always developed new technologies and there's always been widespread fear that all the jobs would disappear and society would collapse.

[00:12:07]This started literally thousands of years ago with advancements in agriculture. Full-time adults, they used to basically only be able to generate enough food to cover just a little bit more than themselves. Meaning that 90% of people used to spend all of their time working to farm or hunt or forage for food. And as agriculture advanced, human capital was freed up and suddenly tons more jobs were created to fill the gap. We saw the same thing in the industrial revolution as well. We saw lites rioting and burning down factories due to the fear of their jobs making things disappearing. But in the end, the efficiency gains from technology led to more manufacturing jobs, not fewer. As an example, if AI, just as an example, does get to the point where lawyers are 95% replaceable by AI, my genuine expectation and prediction is that demand for legal services will go soaring up as the cost to access it drops off a cliff. And there will be far more jobs in the legal sector than there were before. So, personally, this isn't something I worry about all that much, especially when credit issues are so monstrous right now. Now, if there's a specific topic you'd like me to cover tomorrow, leave a comment down below in the description. Or if you just want to stay up to date on the financial news the legacy media won't show you, subscribe to this channel and like and comment under this video so my next videos show up for you on the algorithm.

[00:13:25]Or you can join my Substack to see the content I'm not allowed to post on YouTube by clicking the button on screen here. My mission with this channel is to provide the real news the legacy media won't show you. But unfortunately, there are some things I'm just not allowed to say here. And recently, more and more of my videos have been getting demonetized and censored. So, I've launched an email newsletter covering the news that I'm not allowed to talk about here.