The Corporate Central Bank Playbook

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To investors,

In my opinion, JP Morgan is secretly building a central bank.

Recently, the financial behemoth announced plans to launch a digital currency (JPM Coin) that would be used to move money around internally. While the media wondered whether JPM Coin was a “Bitcoin killer,” the sophisticated crypto community rolled their eyes and got in a few cheap laughs on Twitter.

This centralized digital currency is based on a private blockchain and backed one-to-one by US dollars. Unfortunately, few details have been shared on how the USD peg will be verified on a continuous basis though.

For context, JP Morgan CEO Jamie Dimon was previously asked numerous times about Bitcoin, cryptocurrency, blockchain, and the bank’s plans in the space. His answers followed a familiar pattern — he ridiculed Bitcoin, he said it had no value, and he questioned the intelligence of those who invest in it.

But then something odd happened. When Mr. Dimon was recently asked about the future prospects of JPM Coin, he said that it could one day be used by retail consumers for every day commerce. This is a fairly significant change from the original talking points in the launch announcement.

In fact, his comments made me realize that JP Morgan is going to try something so audacious that we should be offended that they would even try it. Lets call it the Printing Press Playbook and here is how it works:

  • JP Morgan creates and launches JPM Coin, which everyone is told will be used to move money internally in a more efficient manner.

  • The bank realizes that blockchain technology actually works, so they begin offering JPM Coin to institutional clients and peers for transactions.

  • As the institutions begin adopting JPM Coin, JP Morgan then begins pushing consumers and retailers to use the digital currency for every day transactions.

  • Once JPM Coin is widely adopted, JP Morgan comes up with a clever reason to temporarily diverge from having every JPM Coin backed by a US dollar (just as the Nixon administration said the US dollar would temporarily break from the gold standard in 1971). 

  • JP Morgan promises that they’ll go back to the US dollar-backed version of JPM Coin in the near future, but this promise is never fulfilled and JPM Coin becomes a non-collateralized digital currency.

  • Now that the bank has full control over a digital currency that has little transparency and a high degree of adoption, they begin creating more and more JPM Coins out of thin air.

  • The more JPM Coin is adopted, the more the bank prints.

The Printing Press Playbook is one of the oldest tricks. The key is to get adoption, promise any break from the underlying asset is temporary, and then print uncontrollably. The US government did this over the last 50+ years (In 1971, the original break from the gold standard was announced as a temporary measure and US citizens were promised that we would go back — we never did).

If JP Morgan is able to successfully execute this playbook, they will have backed into becoming the central bank for a mass adoption currency. They won’t have to rely on donations, bribes, or influence to affect monetary policy decisions anymore. They can go into a conference room and decide to print as much as they want.

We should do everything in our power to prevent this from happening. The US government is already questioned quite aggressively about monetary policy decisions, so imagine if we had to trust a Wall Street bank that was previously charged with a felony

Stopping this nefarious plan is quite simple — there should be a federal regulation passed immediately that outlaws a for-profit financial institution from breaking away from the underlying asset of any digital currency that they market as an asset-backed currency. While this would be an aggressive move, “drastic times call for drastic measures.”

JP Morgan isn’t building a centralized digital currency. They’re building a full fledged central bank. And if we let them do this, the jokes on us.


This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 95,000 other investors today.


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Nothing in this email is intended to serve as financial advice. Do your own research.