Invest In Gold

Here’s an item that Ian found a couple of weeks ago. He sent it to me under the title “Invest in the “yellow metal” !!!!”
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The Daily Reckoning newsletter says….

“–The banks want a deal that keeps them in business. They want the Paulson deal. But the U.S. taxpayers don’t want the Paulson deal. They’ve said so all week. So where does that leave us?

–It leaves us exactly where we’ve always had to be: the continued de-leveraging of the global financial system. That means more asset-write downs, more bank failures, and sooner or later, a run on a few banks as depositors begin to realise that the frozen credit markets are going to lead to the death of some over-leveraged banks unable to fund their operations or roll over their debts.

–We may get Paulson Two, of course. Congress will cook up some other version of the plan that addresses things like equity warrants or taxpayer protection. But none of that solves the problem at the heart of the financial system: a tremendous amount of borrowed money has been invested in assets that are falling in value. The inevitable result is a credit deflation. There is no way of improving the quality of the assets.

–The Fed is not waiting to see what Congress does to respond. It’s about to grow its balance sheet in a monstrous way. It will take on new liabilities and create new money to do so if it must. That’s why the only exception to yesterday’s commodity sell-off was gold. We’ll have more on this latest phase of the crisis in a special mid-week edition. Until then…”

….Ian

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