However one aspect of it is the idea that the US and UK governments, and others which are in control of their own currencies, can spend as much as they want to regardless of how much revenue they may be collecting. As you’d expect with an economic theory, economists struggle to agree on what MMT actually says, let alone whether they think it’s true or not. So when Dimon tells us that the US banking crisis is all over, we do have reason to suspect that Mandy Rice Davies Applies: He would say that, wouldn’t he?Īnother point to note about all this is the light it casts on one of the more foolish progressive ideas of modern times: Modern Monetary Theory (MMT), aka Magic Money Tree. Dimon may be concerned at the prospect of the government twisting his arm to make JP Morgan buy up more failures, as it has already bullied him into buying First Republic. If we don’t believe it, then the troubles will move on to the next banks on the list – thus the weakening share prices of potential candidates this morning. ![]() So Dimon’s statement will be a self-fulfilling prophecy if we believe it. It’s what happened to Northern Rock in Britain back in the noughties. Loss of confidence is what took down First Republic and Silicon Valley Bank before it. If we don’t, if we maintain our confidence that we can have our money back and therefore don’t ask for it, the bank will be fine. If we all turn up to ask for our deposits at the same time then the bank fails. The bank has lent much of our money out to other people and businesses. But it’s the plain truth that banking only works by getting us marks – sorry, depositors – to have confidence in something which is not true: namely that our money is “in the bank” and we can get it out whenever we like. That’s not to say, of course, that there’s anything criminal going on. This is a good time for American depositors to remember that all banking, not just US based banking, is essentially a giant con – a confidence trick. Shares in other American regional banks are falling this morning. ![]() Investors clearly think that the Fat Lady may still be warming up in her dressing room. If we who have deposits in US banks believe him, what he says is true if we disbelieve him, it is not. But his announcement is as much an attempt by him to stabilise US banking as it is a genuine forecast. He might well be right on that: betting against Dimon’s views has not been a known money maker over the decades. Jamie Dimon, CEO of JP Morgan, has announced that following First Republic’s crash and burn the US banking crisis is over.
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