A Sign of the Times

“Billboard improvement” is a colorful way to describe vandalizing a billboard in order to give the advertisement a totally different meaning. I recently ran across one such billboard improvement that I found rather hilarious. 


Improved Wachovia Billboard
"Improved" Wachovia Billboard

The thing is, I’ve always thought that when I saw these Wachovia billboards ever since they were sold to Citigroup with the “assistance” of the FDIC. At the time I thought this was the classic case of the FDIC guiding a weak bank on the verge of failing into a merger with a stronger bank, but not less than a month or so later and Citigroup was begging for a bailout less they would fail. 

In order to ensure the survival of our banking system, literally trillions of dollars has been injected into the American financial system. The ultimate effect of all this money creation will be to cause inflation, just as Ben Bernanke told us it would back in his speech on how to fight deflation. The other, somewhat temporary, side effect of all this money creation will be to drive down interest rates; anyone who wants to borrow money can get some of the newly created money that was just pumped into the banking system on the cheap. Lower interest rates will also offer people less reason to save, and that’s why I find that Wachovia billboard so hysterical.

In essence, Wachovia was a part of the banking system that reaped profits by engaging in making mortgage loans to people who couldn’t afford them and them repackaging the loans and selling them to Wall Street. We are now having to pay the price for the sins of the banking system and the Fed has decided the form that this price shall take: inflation and low interest rates. Yet they advertise that they will help “your little ones grow.” I have to say that this billboard was indeed improved. Now the billboard plainly says what Wachovia (and the entire banking system) will do to your money… And they say that there’s no truth in advertising.

Of course, these lower interest rates won’t last forever. Eventually people will come to understand how precarious the value of their money really is, and then they’ll start demanding higher interest rates. Not to mention, we’re going to see a much higher value of gold- the canary in the cole mine of the monetary system. Which is just what we’re starting to see. Gold moved from $764 at the start of the week to close the week at $808. Similarly, Barrick Gold has gone from $27.44 to $31.32. 

As an investor in Barrick Gold, I had a nice week, and I think we’re going to start seeing some nice moves in the gold sector over the next few months are markets realize that all of these deflationary fears are overblown. Bill Bonner is predicting that the system has one final bubble to blow and that will be government debt; that the price on government securities will go from overblown to in the tank as interest rates have to rise as inflation worries persist. I would have to agree. Going forward, gold is a very exciting place to be. As we goldbugs sit back and watch the financial system collapse, we will get to do as that old song by Everclear goes “Watch the World Die.”

4 thoughts on “A Sign of the Times”

  1. Preston,
    I agree that these trillions that have been injected into the system are going to be a problem. But the real problem is the size of the debt that these new bailouts are being added to.

    A great graphical representation is available at Chris Martenson’s, The Crash Course particularly Chapter 11, How much is a trillion, and Chapter 12, Debt.

    To convey how huge a trillion dollars is, Chris compares a trillion dollars to a billion dollars. He shows that a billion dollars, if composed of a stack of one thousand dollar bills, would reach just 358 feet, a third the way up a giant skyscraper. But a trillion dollars is a stack of one thousand dollar bills 67.9 MILES HIGH !!!

    Then, in Chapter 12, we see the national debt (10.6 trillion dollars a few minutes ago, not including future obligations like social security, medicare, etc.) plotted since 1950. We’re on the ascending slope of a geometric progression, the straigt up off the chart portion (we’ve all heard of the amazing potential of compound interest When it’s applied to debt rather than savings its just as amazing). This will screw the dollar and turn the US into a very different country than the one we grew up in.

    Other than that, have a nice weekend! -Mark

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