Over the past few days we’ve seen some pretty scary stuff. The prevailing emotion in the markets seems to be uncertainty and fear. Stocks have gone down, the dollar has followed. We’ve also seen oil tick up with gold shooting like a rocket. Who could have seen any of this coming?
“What I’m confident about is that we will get through it,” said Alistair Darling yesterday about the current economic crisis. Well, of course, we’ll get through it. What I want to know is will we get through it with a currency?
Now here’s a big shock. It turns out that British taxpayers could end up shelling out even more for Northern Rock than we were all told was on the cards.
Since the days of Alan Greenspan, the Fed has been so petrified of a slowdown it has practically killed the value and stability of the dollar, says Adrian Ash in Whiskey and Gunpowder.
But by keeping interest rates below the rate of inflation for three straight years starting in 2002, the Fed created a bubble in the housing market. That bubble has now popped, leaving in its wake a severe liquidity crisis.
Now big banks won’t lend without the backing of government bonds, and the Fed continues to inflate money supply. All good news for gold, says Adrian…
Northern Rock (PINK:NHRKF) in Britain, Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) in the US, Aerolineas Argentinas in Argentina. Governments across the world are nationalizing – at least implicitly – struggling private enterprises.
It probably won’t be long before the US government nationalizes General Motors (NYSE:GM), says Bill Bonner in The Daily Reckoning.
Who’s really responsible for bringing down the likes of Fannie and Freddie? Look no further than the US government’s over-active dollar printing press, says Bill…
I’m reading a strange little book this week. It is called The Fall of Northern Rock and is written by an ex-employee of the now nationalised bank called Brian Walters. I’m not quite sure why Walters was the one commissioned to write the book, for the simple reason that he doesn’t seem to have any more inside knowledge into the affair than the rest of us.
Well, well, well. Another development in the ongoing saga of my former employer, Northern Rock.
How does a bank work? In very simple terms, a bank collects deposits from savers, and lends the money to borrowers. It pays interest on the deposits, charges a higher rate of interest on what it lends, and keeps the difference as profit.
After noting an historic move higher in the gold price last month, maybe we should be wary of picking a bottom today.
As markets from equities to commodities succumb to ever-wilder mood swings, many private and institutional investors are, quite sensibly, hoarding cash.