In the
financial realm, many are lured by the the derivative illusion and ensconced in a rapidly
dissipating cocoon of self-satisfied self-deception woven over their eyes and
mind leading to their faulty thinking that the way they see things is the way
things really are. Nowhere is this more evident than among the herd
of grandiose single digit midgets: Bank of America,
Citigroup, Barclays, ING and soon to join them UBS.
SINGLE
DIGIT MIDGETS
The Charlotte Business Journal reported on November 5,
2007, “Bank of America is now the largest bank in the country by
market capitalization — and it may stay that way for a while.
After weeks of flip-flopping with Citigroup Inc. for
market-cap supremacy — with the financial rivals no more than $3
billion apart at various points”. Such
venerable illusions based upon currency illusions are rapidly
dissipating.
Bank
of America and Citigroup Inc. are single digit midgets. Their current
market capitalizations are $28B and $19B respectively. The rapid
evaporation is even more stark when valued in gold. The most powerful currency
is gold and it is the most reliable tool for performing mental calculations of value.
During
the very first stages of the great credit contraction
the former behemoths Bank of America and Citigroup have shrunk to become a
mere 10% of the current
assets of the five oil majors Exxon, Chevron, Total, British
Petroleum and Conoco Phillips. Other former behemoths, like Bear
Stearns, Lehman Brothers, Washington Mutual, Indymac, etc. have evaporated
into the annals of history.
I am
still amazed the oil majors have not bought gold and emptied the COMEX of
every bar. When my 17 December 2008 article was published gold was a mere
$850/ounce and would have accounted for a mere 0.36% of their current
assets. At all times and in all circumstances gold remains money and
cannot evaporate like corporate deposits at Citigroup or Bank of America.
I reiterate that the importance of gold
investing for the oil majors should buy and demand physical delivery of
every registered and deliverable COMEX gold bar.
On my
article ‘How the Treasury Bubble Will Burst and Why‘
at Seeking
Alpha I received a comment from Alan Brochstein, CFA and fellow Gold
Standard Contributor who provides analytical services for hire. He said,
“Trace, sorry, but this makes absolutely no sense…” This is
not surprising considering his 8 Dec 2008 article ‘Own Gold? Time to Fold‘ where he stated,
“Gold remains a sucker’s bet…”
INTERNATIONAL
BANKING TROUBLE
While America has her own banking problems the rest of
the Western world has theirs. Eastern Europe’s problems are epic.
The entire herd of single digits midgets have somehow convinced the
politicians they are important. All of them are rapidly evaporating.
Why are so many countries making the stupid decisions to bailout the
banks?
COUNTRY
|
GDP
|
BANKS
|
ASSETS
|
Denmark
|
$312B
|
Danske Bank (DNSKY.PK)
|
$615B
|
England
|
$2.80T
|
Royal Bank of
Scotland (RBS), Barclays (BCS)
|
$8.6T
|
Switzerland
|
$313B
|
UBS
|
$3.0T
|
France
|
$2.60T
|
BNP Paribas, Agricole, SocGen, Dexia
|
$6.7T
|
Germany
|
$3.30T
|
Deutsche Bank
|
$2.7T
|
At the
IMN Real Estate Conference during the keynote Henry
Cisneros, former HUD Secretary and Obama sycophant, remarked, “We must
have large regional banks like J.P. Morgan, Bank of America, Citigroup,
etc.” Why?
Humanity
survived for thousands of years without large regional or national banks.
The world is not going to end if they evaporate. What is the
point of bailing out rapidly evaporating institutions? For example,
Citigroup has already received more than twice its market capitalization in
TARP funds. The derivative black hole will vaporize whatever illusory
currency reaches the event horizon.
As the
Mentor in C.S. Lewis’ short but masterful The Great Divorce taught, ‘all Hell is smaller than
one pebble of your earthly world: but it is smaller than one atom
of this world, the Real World.’ Fiat’s jaws are
rapidly shrinking and eventually will be unable to bite even the smallest
gold atom.
The great credit contraction
continues to grind on and the increasingly irrelevant single digit midgets
continue evaporating. Eventually these soon to be worthless single
digit midgets will become at the most footnotes in the annals of history.
The current price of the monetary metals, while rising, in a few years will be
considered extremely cheap. Those who fail to secure some physical gold
or physical
silver bullion, as silver is still in backwardation, will be, using Mr.
Brochstein’s term, ’suckers’.
Disclosures:
Long physical gold and silver. No positions in the worthless
banks or in the oil majors.
Trace Mayer
RuntoGold.com
Trace Mayer,
J.D., holds a degree in Accounting from Brigham Young University, a law
degree from California Western School of Law and studies the Austrian school
of economics. He works as an entrepreneur, investor, journalist and monetary
scientist. He is a strong advocate of the freedom of speech, a member of the
Society of Professional Journalists and the San Diego County Bar Association.
He has appeared on ABC, NBC, BNN, many radio shows and presented at many
investment conferences throughout the world.
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