Things fade into the background if they’re no immediate danger to us. The aging nuclear power plant that provides power but is not in compliance with safety regulations and sits near an earthquake fault line (like the Indian Point nuclear reactor outside of NYC). Or the cost of war in lives and money that doesn’t effect you… yet. Or the bank that continues to go into debt making risky bets because the government bailed them out by also going into debt. And without making cuts in government services…yet.
Last week the CEO of JP Morgan Chase, Jamie Dimon, made an interesting announcment. The company lost over $2 billion dollars continuing their risky betting. Now, this is a fraction of their hundreds of billions of dollars in income. (Income, not profit: They have 3 times as much debt as assets.) So is Dimon preparing us for worse to come? Maybe. Or is he trying to establish an environment of acceptance of risky betting? Dimon said the investments were a “terrible, egregious mistake” but “we maintain our fortress balance sheet and capital strength to withstand setbacks like this.” Was this a PR move to instill trust in a market that is losing it?
In 1912, JP Morgan, the founder of this company, was speaking in a testimony with Congress. He was asked whether banking debt is based on money or property.
He answered that it was about character, “before money or anything else. Money cannot buy it…Because a man I do not trust could not get money from me on all the bonds in Christendom.”
Do you trust a market where you buy things like a television? How about a market that buys…money? There’s a big difference that needs to be appreciated. One is in the business of creating cheap goods and services for money. The other is in the business of creating money. One is less government driven and difficult to corrupt, while the other is more government driven and much easier to corrupt. What they have in common is that the consumer decides whether to buy their goods or services.
And that consumer is you and me.