C Thomas breaks down the differences between pre Federal Reserve America and post Federal Reserve America
“There are certain things you shouldn’t be surprised about: how do you do accruals, what are your real margins, what are you bullshitting yourself about? I was always a real fanatic about this.“ current CEO of JP Morgan Chase, Jamie DimonThe Dow Jones Industrial average has only 30 stocks in its composite, some of the biggest and most influential companies in America. Only one man has been responsible for leading 4 firms that ended up in the Dow Jones. This person was also responsible for founding not 1 but 2 companies that would go on to be the biggest company in the world. The country’s greatest banker was born April 17, 1837. His father was in finance and John Pierpont Morgan was the grandson of the founder of Aetna insurance company. So from Childhood JP was surrounded by finance and he took to it.
JP began in banking in 1857 and he used his European connections to allow Europeans an avenue to invest in America, but he also grew his own investment portfolio over time. Controlling interests and reorganizations in companies as diverse as railroads, steel, and shipping were all Morgan’s plays. His sharp acumen and ability to turnaround losing enterprises served him well as his sphere of influence on Wall Street grew. His ability saved the US government twice from default: in the Panic of 1893 by providing gold to the US treasury, and in 1907 by force of will, he organized emergency meetings in his library with bank executives and treasury officials until his plan to avert disaster was agreed to in order to calm the markets. His singular ability and power was so vast he became indispensable while the country grew from the reconstruction era to the modern industrial power. Smart and efficient allocation of resources allowed cities and industry to flourish and the United States to embark on one of the greatest financial trajectories ever undertaken by a collection of united people. It is unfortunate that the very greatness of ability of one man could cause the formation of such an institution that represents the opposite of ability. Upon his death the United States created the Federal Reserve because there was simply no one to replace him, but the government realized that the country needed financial stability.
At the time of his death the income tax had been around for two months and the Federal Reserve had not been established. Libraries, public buildings, and bridges still in use today were financed and built by the private market. Great companies founded and incredible cities and skylines were built with little federal interference, and we still had money backed by a gold standard. In testimony in front of Congress he was asked which was more important in commercial credit: money or property and he responded “The first thing is character.” He helped build this country when it overflowed with character.
Today after a century with the Federal Reserve, we stand as the world’s greatest debtor nation in the history of the world. We are running record trade deficits and our currency is backed by the full faith and credit of the US govt. Our nation is off the gold standard and we have bubbles in the stock, bond, and real estate markets. 40% of the currency in the history of our nation was printed since Covid. I don’t think JP Morgan would have recommended this path and I don’t think he would have concluded that we were behaving with character.
Austerity has been preaching frugality and that is important, but so is informed and efficient allocations of resources and capital. $183 million for the National Agricultural Statistics Service, $992 million for agricultural experiment stations, $4 million for the office of ethics, $65 million for the restoration of the Pacific salmon, $232 million set aside for the US Trustee Program (I know what a salmon is but I don’t even know what a US trustee is or does), and $18 million to be spent by the Community Relations service presumably to quell the outrage over the salmon and trustee thing. These are all in the first 80 pages of the 2,126 2nd Covid bill signed into law by Donald Trump. Somehow all of this had to do with a pandemic. These do not sound like informed and efficient allocations of resources or capital. Do you wonder why we have $4 gasoline or a steak costing $20/lb? Is it becoming more clear? I will make sure that I slap you in the face with a Pacific Salmon to remind you that we need an efficient allocation of resources. Which brings us to the word of the week.
Allocation- to apportion for a specific purpose or to particular persons or things.
JP Morgan wouldn’t approve of our resource allocation and he wouldn’t bail out the United States if he were alive today. In fact, he probably wouldn’t be a banker, no he would probably be a barber. He could make it his life’s work of cutting spending, trimming budgets, and sweeping foolish spenders out of office. What’s interesting is that was his life’s work, and that is how he built such great businesses and optimized entire industries and built great companies and cities and earned the respect of the entire country. If we as a country are going to continue to be great, we will likely have to do the same.
Sincerely yours,
C Thomas Printer
“Some think that the rebel bills (meaning fiat currency) depreciated because people lost confidence in them or because they were not backed by tangible assets. Not so. There were simply too many of them.” Financial historian Robert E. Wright on why the nation’s first currency, the continental dollar failed during the revolutionary war in the 1770s and 1780s.
On this date in 1961 US troops began their failed invasion into the Bay of Pigs in Cuba, Lee Iacocca unveiled the Ford Mustang in 1964, and in 1970 Apollo 13 splashed down safely following a treacherous space journey.
What am I reading this week? Congress.gov and the Consolidated Appropriations Act, 2021. It is where you can read about how your money is being spent foolishly. But I only read a little because it is too depressing so I watched a movie as well. The Big Country with Gregory Peck, Chuck Connors, Burl Ives, Charlton Hesston, and Jean Simmons. A wonderful tale of courage in the face of violence, wonderful acting, and great cinematography.
Also born on this date:
Sean Bean,
William Holden,
Lela “Sunshine” Rochon,
Harry Reasoner,
and Karen Blixen.
This is G Spot Johnson asking you to have your congressman and congresswoman spayed or neutered.