Monday, November 26, 2012

J.P. Morgan on Gold and Credit - What did he say?

I have seen quotes from J.P. Morgan used to support the Gold/Silver is money meme. Sound bites such as:
"Gold and Silver are money. Everything else is credit." or "Gold is money. Everything else is credit."
These have been thrown around for a while now. The quote comes from testimony in front of congress (1912) only 3 months before Morgan passed away at age 75. The real quote that the modernised versions originate from is:
Money is gold, and nothing else. 

If a man had the credit, and I had the money, his customer would be badly off.
Apparently a silverbug added the Silver reference which is definitely not in the original transcript. You can read the transcript in full here. Even the above two lines (as they appear above) were taken separately from different answers and pieced together in the 'Morgan Epigrams', so are not necessarily in context.

The comment on credit came from the following question and answer:
Q. If a man controlled the credit of a country, he would have a control of all its affairs? A. He might have that, but he would not have the money. If he had the credit and I had the money, his customer would be badly off.
One might consider the position of China and the US at the moment, with the US having Gold reserves approximately 8 times the size of China, while China holds well over a trillion dollars in US Debt. Who holds the credit and who holds the money? The reports of the United States death may have been greatly exaggerated.

Other interesting snippets epigrams include this nugget:
I think manipulation is always bad. 

I never sold short in my life that I know of, but I do not see how you will get along without it. It is a principle of life, I think.
Most amusing given the activities of the modern investment bank that JP Morgan is today:
As a result of Chilton’s  public statement,  several individual investors  brought lawsuits against JP Morgan and HSBC, claiming  they lost money on positions they took in silver futures on  the Comex. One such suit claims that in  August, 2008 JP Morgan and HSBC controlled over 85% of the commercial net short position in COMEX silver futures, and that this represented a short interest of 169 million troy ounces of silver, equal to about 25% of annual world mine production. Forbes
Something to keep in mind when considering these quotes is that the US was on a Gold standard when the comments were made. Would Morgan make the same comments today? I wouldn't be drawing any conclusions from a 100 year old quote from a bygone era.

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