A billion here, a billion there
JPM misplaces a bit of money:
JPMorgan Chase disclosed in a regulatory filing on Thursday that a trading group had suffered "significant" paper losses in a portfolio of credit investments. The troubles at the unit, the so-called chief investment office that makes trades to balance the bank's assets and liabilities, could weigh on the bank's broader earnings. The corporate group, which includes the C.I.O. group, is expected to lose $800 million in the second quarter, although the final results will depend on the market and other activity, the company said in the filing. Previously, JPMorgan had estimated that the group would report net income of roughly $200 million.How long will it be before the first giant US bank is nationalized? Before the end of the year? Before the election?
Labels: banks
38 Comments:
You've got it wrong Vox, Obama will nationalize all 401k's and then contract JPM to manage it.
How long will it be before the first giant US bank is nationalized?
Are they not effectively nationalized already?
I think I've asked something similar to this before (and forgive me, like I said, I'm very uneducated when it comes to this stuff), but are the banks contributing to the inflation crisis, not simply by the uncontrolled printing of fiat moneys by the Fed, but by misrepresenting their finances, and therefore creating more "digital currency" out of thin air that has no correspondence to either paper money or material wealth?
In other words, since they are already involved in such criminal actions, what could prevent them from punching in an extra zero or two and creating their own form of fiat currency (completely bypassing the Fed and any physical forms of production)?
...and with being said- I just thought of this- if the banks are going completely uncontrolled, and in complete negligence of criminal behavior, what prevents them with screwing with other currencies as well? Suppose they get on their computers and register a deposit of 1mil Swiss francs as 2mil francs, and switch the francs to their accounts? All of a sudden 1mil francs is created out of thin air? How does this work? Or does it not work? If the U.S. government is not paying attention the banks, how can they not control/disturb any country's currency?
Am I missing something here, because this seems outrageous.
FHL - The banks themselves don't create money but the Federal Reserve does.
I'd suggest you read The Creature from Jekyll Island about the creation of the Federal Reserve. Also of course, read End The Fed by Ron Paul.
This will give you a great education and probably piss you off. If it doesn't, there's something seriously wrong with you.
Thank you for the recommendations Difster! I will defiantly have to read them. But I must say I'm already pissed off, and I only know a fraction of the truth, haha!
But I am still curious, I know the standard answer is that the banks cannot create money. But how about this: a year ago I was called by my bank letting me know someone had purchased 600 dollars worth of stuff at Walmart on my card. I denied the purchase. I found that the bank immediately replaced my money.
Now did they really go find this guy and beat him down and take away his 600 groceries? Probably not; I assumed the bank must have fronted the money they returned to me. I assumed this a practice they do to keep customers, an investment of sorts.
But then I thought... wait, all this money is just a number on a computer. It's not like they counted out 600 dollar bills and placed it into a file or something! Couldn't they have just typed in the money? Just made it up, on the computer?
I know their supposed to get audited by the Federal Government, and all that, but since the Feds have turned out to be corrupt, maybe they can just get away with that? Can they get away with that?
(and this is 600 dollars... but with the Big Banks, they're talking like billions... who would notice a million here and a million there?)
"..although the final results will depend on the market and other activity,..."
Final activity meaning: Checking on how much fake money and get-out-of-jail-free cards will be needed. Which will result in windfall profits for Parker Bros., what with the gov't purchasing every copy of Monopoly they can get their hands on in North American toy stores.
The banks themselves don't create money but the Federal Reserve does. -Dif
Not quite Dif. The banks create money via the multiplier.
End of the month?
Difster, in a phone swap I seem to have lost you're number. Please call me.
... sorry, thinking out-loud...
But now that I think of it- I have no record of this ever happining. From what I could see on my statements, a $600 charge was there, then it was gone. Could the bank really have just said "Delete that purchase, and press Enter." And so now someone is out there with $600 worth of stuff, purchased with my money, which is still my money apparently, since it magically reappeared in my account? Who checks this, and can they check this closely? If I don't even have a record of this happening, who's to say the auditor's will catch it? What if there is no record of this, and $600 dollars has just been created?
You're right Salt, I was trying to keep it simple for now until he reads those books.
only off on there estimates by a billion... JUUUUST a bit outside.
@Nate
Yeah, that's actually pretty acceptable. The value of the actual paper pulp was probably only in the thousands... and digital money is just 1s and 0s. I'm not worried.
@Difster
Yeah. When you actually explain fully how the system works, it sounds so radically retarded that the average rational human will write you off as a nut.
FHL, they most likely took the money back from WalMart's account. WalMart ate it as a fraud loss.
It's funny now. When the derivative pyramid really starts to crumble it will be downright hilarious. Dark comedy of course.
"But I am still curious, I know the standard answer is that the banks cannot create money"
BZZZT
Banks can and do create money from thin air. They do this by leveraging money they have on deposit. When they want to create more new money from thin air... they simply adjust their reserve policy downward a bit. They can create money for new loans... and they can also create new money for investing.
Not that for anyone else... this is fraud.
The bankers can lose billions and you?... well, you get felt up at the airport.
The good news? The good news is that The State has lost "divine" status in the minds of millions.
If debt is money, then bankruptcy must be the epitome of thrift.
Nice try, JPM.
When you actually explain fully how the system works, it sounds so radically retarded that the average rational human will write you off as a nut.
I believe I understand it but may I ask you to refer me to something that explains it in detail. I want to make sure I get it right.
"Here's how the counterfeiting process works in today's world. Let's say that the Federal Reserve, as usual, decides that it wants to expand (i.e., inflate) the money supply. The Federal Reserve decides to go into the market (called the "open market") and purchase an asset. It doesn't really matter what asset it buys; the important point is that it writes out a check. The Fed could, if it wanted to, buy any asset it wished, including corporate stocks, buildings, or foreign currency. In practice, it almost always buys U.S. government securities.
Let's assume that the Fed buys $10,000,000 of U.S. Treasury bills from some "approved" government bond dealer (a small group), say Shearson, Lehman on Wall Street. The Fed writes out a check for $10,000,000, which it gives to Shearson, Lehman in exchange for $10,000,000 in U.S. securities. Where does the Fed get the $10,000,000 to pay Shearson, Lehman? It creates the money out of thin air. Shearson, Lehman can do only one thing with the check: deposit it in its checking account at a commercial bank, say Chase Manhattan. The "money supply" of the country has already increased by $10,000,000; no one else's checking account has decreased at all. There has been a net increase of $10,000,000.
But this is only the beginning of the inflationary, counterfeiting process. For Chase Manhattan is delighted to get a check on the Fed, and rushes down to deposit it in its own checking account at the Fed, which now increases by $10,000,000. But this checking account constitutes the "reserves" of the banks, which have now increased across the nation by $10,000,000. But this means that Chase Manhattan can create deposits based on these reserves, and that, as checks and reserves seep out to other banks (much as the Rothbard Bank deposits did), each one can add its inflationary mite, until the banking system as a whole has increased its demand deposits by $100,000,000, ten times the original purchase of assets by the Fed. The banking system is allowed to keep reserves amounting to 10 percent of its deposits, which means that the "money multiplier" – the amount of deposits the banks can expand on top of reserves – is 10. A purchase of assets of $10 million by the Fed has generated very quickly a tenfold, $100,000,000 increase in the money supply of the banking system as a whole.
Interestingly, all economists agree on the mechanics of this process even though they of course disagree sharply on the moral or economic evaluation of that process. But unfortunately, the general public, not inducted into the mysteries of banking, still persists in thinking that their money remains "in the bank.""
More here:
http://www.lewrockwell.com/rothbard/frb.html
I just downloaded and started reading "End the Fed" on Kindle (clicked 'purchase' and the numbers in my online account change)
Thanks to anyone who responded to my post. But it is a bittersweet thanks, as the more I think and read about this the more disturbed I get.
Also, I second civilServant's post. Vox has listed several books on the right-hand column, but they seem mostly about economic theory itself in general. Anything relating to today's situation in America is greatly appreciated.
From Vidad's link:
"Hence, they think of their checking account as equivalent to a warehouse receipt. If they put a chair in a warehouse before going on a trip, they expect to get the chair back whenever they present the receipt. Unfortunately, while banks depend on the warehouse analogy, the depositors are systematically deluded. Their money ain't there."
Damn.
Banks can and do create money from thin air. They do this by leveraging money they have on deposit. When they want to create more new money from thin air... they simply adjust their reserve policy downward a bit. They can create money for new loans... and they can also create new money for investing.
When I was a kid I always thought banks are the money factory and dreamed of having one someday....
Toby Temple May 10, 2012 10:54 PM
When I was a kid I always thought banks are the money factory and dreamed of having one someday....
Precocious child. You knew more than all the adults around you.
I doubt we'll see an outright nationalization of the big banks. Instead we'll get more fraud, false promises that corrective action is being taken, bailouts, and kickbacks to politicians, all paid for by the American people and anyone who holds dollars.
Dfister: You've got it wrong Vox, Obama will nationalize all 401k's and then contract JPM to manage it.
I was going to say Corzine, but I suppose JPM would do. Bernie Made-off would be more fun though.
"If debt is money, then bankruptcy must be the epitome of thrift. "
I can hear the voice of the actor hired to do those Smith Barney commercials; "We make money the old fashioned way...".
As Spain nationalized its 8th bank this week, I'd say Jamie and ilk have alot to answer for. Where will the DOJ/SEC (whoever) be on this? Nowhere and nothing will happen. That cash is gone.
@FHL
Mystery of Banking by Murray Rothbard will help and is available as a free pdf download from Mises.org. History of Money, Credit, and Banking is also helpful. I also like to start young boys (or ignorant men) with Whatever Happened to Penny Candy, a cheap paperback, some history and terminology that is helpful.
Regarding the Fed and its utter fraud, the People enjoyed at least a modicum of protection from unbounded government deficits and runaway inflation because the government had to find purchasers for its treasuries, forcing interest rates up to compensate for risk when deficits were deemed excessive or face a failed auction.
It's now become standard and typical for the Federal Reserve to soak up whatever amount of treasury debt necessary to keep interest rates low and to keep auctions from failing. Going from memory, the Fed purchased > 60% of treasury debt last year. This policy removes any vestige of accountability and virtually ensures currency collapse as some point. Fraud. Fraud. Fraud.
It's now become standard and typical for the Federal Reserve to soak up whatever amount of treasury debt necessary to keep interest rates low and to keep auctions from failing. Going from memory, the Fed purchased > 60% of treasury debt last year. This policy removes any vestige of accountability and virtually ensures currency collapse as some point. Fraud. Fraud. Fraud.
And I think the answer to my perennial question is ... the Fed just credits the Treasury's account, i.e., prints the money, and inflation grinds on. And yes, a day must eventually come when there is simply no market for the Treasury's fancy engraved paper.
It's just surreal when you think about it. Nobody even knows what's in the real economy any more. When the collapse happens, you are talking about millions of people who left work yesterday, got up and headed to the office that morning and, nothing. The doors will be locked, the phones will be dead, accounts frozen, senior executives calling their wives and telling them to get the kids out of school and meet at the airport...
Of course, there are a lot of other less dystopic scenarioes, but the distortions are really enormous at this point. I can't help but wonder that when this last great bubble in sovereign debt bursts, it will be a civilization-shifting event.
"Where will the DOJ/SEC (whoever) be on this?"
They're looking into more urgent matters, like Arpaio's deputies asking people if they're in the country illegally when they're stopped for probable cause, and trying to find out who leaked the details of Gunwalker to Issa.
"That cash is gone."
Well, it's not exactly GONE - it just found a new home, temporarily. And JPM can get another zero interest loan from the Fed to cover their losses, so what's the problem?
It is said burberry handbags are on discount sale, I want to get designer burberry cheap bags for women brown sale, and have a look at burberry silk ties for my husband.
NATIONALIZE THE BANKS?! How exactly would that increase Jamie Dimon's annual bonus check? Methinks Vox has misunderstood who works for who--nationalizing the banks would make Jamie work for Congressman Joe Schmoe. And that, believe me, is not gonna happen. Bernanke will punch the "Print" button for JPM in the amount JPM needs, and Congressmen will continue telling senior citizens that inflation is under control and a cost-of-living increase to their Social Security wouldn't be prudent at this time.
@FHL, RE: Reading List
BUY a copy of The Creature from Jekyll Island. That way it can't disappear down the memory hole from your local library. It's not a perfect book but it'll lay out the fraud pretty well.
Also re-read 1984 to get a general sense of where we're headed after the collapse.
To see how the collapse might go down, read "One Second After."
Then read Hitchhiker's Guide to the Galaxy to put off the suicidal feelings you'll be experiencing.
Then get a copy of the Army Survival Guide, the Idiot's Guide to Farming, and a lot of firearms and water purifiers. Precious Metals after, and only if you have any money left over. Eating takes priority over wealth preservation.
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