Jamie Dimon, CEO of J.P. Morgan Chase, over the past year and a half has been placing a bet of over $500 billion. (Yes, that’s half a trillion and he’s tossing around big numbers like the folks on Capitol Hill.)
During this period J.P. Morgan Chase has accumulated well over half a trillion in bank accounts with a variety of banks in the U.S. including its own subsidiaries. Given that the inflation rate has been two percent during most of this time and is currently running at an annual rate of five percent and is likely to be at ten percent soon, the ante on this bet is already substantial and may be much greater in the months ahead. Just as the dollar in your bank deposit drops in value – i.e. in purchasing power – as the price index rises so the half trillion in Morgan Chase’s deposits declines.
The motive for this enormous accumulation of cash? Mr. Dimon has been quoted as saying: “We have a lot of cash and capability and we’re going to be very patient, because I think you have a very good chance inflation will be more than transitory.” Apparently he believes that the Fed and Congress will be compelled to stop spending and printing and interest rates will go way up and with them the prices of assets – bungalows, bonds, bitcoins – will plummet and Morgan Chase will be able to buy them at prices that will provide a robust return.
While this certainly seems like a rational scenario, you may well wonder whether the players are all rational. Bear in mind we are talking about Capitol Hill and the Fed, the perpetrators of the inflation we now have.