JP Morgan Derivatives Mess Means Buy Gold Posted by James Randolph on May 23, 2012
Since the collapse of the two hundred year old investment bank MF Global on October 31, 2011, we have been warning there would inevitably be other large American banks that would get caught in bad bets and the only way to protect yourself and your value is to buy gold. If you recall the events of just under nine months ago, MF Global was embroiled in a bad $52 million bet on European sovereign debt that ended up costing its customers $1.6 billion in “missing funds.”
It was simply inevitable that there would be another major US bank crisis. With the kinds of bets these banks are being forced to make, it really shouldn’t be a surprise to anyone. The only surprise is that these banks aren’t hedging some of these risky bets with gold.
Further, JP Morgan and its notorious anti-regulation, too-big-to-fail CEO Jamie Dimon, lost this massive amount of money in the derivatives market, which is a red flag for gold bulls. There is no intrinsic value in any derivative, hence its value is “derived,” and this is why the market is so dangerous. Because there’s no derived value, the market has literally ballooned to proportions that threaten our economic system by the very mechanism of JP Morgan’s blunder.
As we said during the debacle at MF Global, these banks and bankers are doing nothing but betting against you with your own money. The only way to protect yourself from them and the banking system is to buy gold. Buying and holding gold takes the money right out of the hands of the banking system.
Another curious aspect of both MF Global and JP Morgan is that the amounts of the money lost is vastly underestimated at first. It was first estimated that MF Global only lost $600 million of customer funds. That’s less than half of the eventual actual amount. As well, JP Morgan is sure to eventually report much higher losses. The Independent is already reporting that the losses could exceed $7 billion rather than $2 billion.
The JP Morgan crisis is sure to continue to balloon out and it is symbolic of the banking attitudes of our time. The best way to protect yourself and put distance between yourself and the unethical banking practices at JP Morgan or any of its associated too-big banks is to buy gold.