A Herd Of Single Digit Midgets

Posted 18 Feb 2009

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.


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…”


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?

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.