Only a few weeks ago, Blythe Masters, Head of Global Commodities at JP Morgan Chase, talking about the importance of gold and silver in the global market place and prices that increasingly affect all our daily lives. All that is given to be true, considering the current state of markets and the fragility in the US Dollar. However, the recent press surrounding JP Morgan is more a sign of the inherent instability in the US banking sector and indicates that it, rather than markets or currencies or politics, will have a vast influence on the gold and silver market in the years to come.
The CEO of JP Morgan Chase, Jamie Dimon, is currently on major damage control, making several news, talk shows, and television appearances in the past few days. Essentially, JP Morgan mispriced the cost and availability of liquidity to both enter and exit large trades. That is as concise and as clear an explanation as we will be getting for a while. JP Morgan, one of the biggest banks in investing grossly misjudged how much money they would need in order to perform adequately in the market.
Currently, the bank is making projections that it has so far lost $2 billion due to this miscalculation. In terms of the size of the investment bank, $2 billion is substantial, but not necessarily a business-altering amount of money. These days, no bank should be losing $2 billion due to misjudgment, which the prevailing opinion of the common American observer. JP Morgan should be responsibly using its money, especially because the bank received billions of dollars in taxpayer bailouts, making the bank more publicly accountable than a typical company or stockholder corporation.
This is just more indication from the behavior of the banking sector that working and investing Americans need to be placing their money in safe, well-performing vehicles. The safest vehicles we have at this point in the American economy are gold and silver, and prices have been reflecting that sentiment in the past two to three years.
There seems little point to waiting for the banking sector to produce yet another example of gross mismanagement verging on possible outright criminality. Just over six months ago we experienced the failure of MF Global, a major US investing bank with hundreds of years of history. In a historic bad bet, MF Global misplaced $1.2 billion of its own customer’s money. It is estimated that about 60 percent of that money has been paid back, but funds are still missing.
It is a given that there will be further trouble in the banking sector. It’s a matter of time. In this case, it is important to listen to the voices of truth talking about the importance, strength, and future of gold and silver in the market. Gold and silver prices can perform well on the bad behavior of banks alone.