“What’s that? Yes, yes, we understand number seventy nine. You are more than just a play on lower interest rates. But don’t worry, your time is coming.”
Gold – the 79th element on the periodic table, was not really whispering to us last night. But had it, we imagine it might have said that there are better reasons to buy gold than the expectation that the US Federal Reserve will be forced to cut the Fed Funds rate before it meets on September 18th. Reasons aside, the fact of the matter is that gold is up ten percent on the year, and was up over two percent on the day. Its US$13.90 rise means one ounce of nature’s money will cost you 704 units of Ben Bernanke’s money.
For regular updates on gold, gold stocks, gold jewellery and gold as money, be sure to visit our special gold site the 79 times.
We were going to write more in depth about the ongoing war between central banks and the market over the price of money. The market price of money, as measured by LIBOR (the rate banks charge each other to borrow), keeps going up. Banks know the score in the credit industry and are reluctant to lend to one another.
Central banks – like pyromaniacal firemen – keep adding gas to the credit fire, lest it go out altogether and the public lose confidence in the frauds that currently pass for paper money. The European Central Bank lent an additional US$76 billion in emergency funds to banks who couldn’t borrow a dime anywhere else. In the States, the Fed anted up another US$30 billion, bringing the total in emergency funds provided to US$200 billion since August 29th, according to Bloomberg.
Will the Central Bankers succeed in averting a wider loss of confidence in the world’s banks? In the whole financial system of wealth accumulation via asset appreciation financed by debt?
A lot will depend on how financially sound the world’s banks actually are. And until the banks tells us how much money they stand to loose from bad loans, we won’t know. Of course, it’s possible the banks don’t know either. Nobody knows anything, your honour.
It reminded us of poor old Job, working in away in his field after God delivered him into the hands of Satan. One by one, emissaries of his doom arrive to tell Job of some new calamity. When each man finished announcing his bad news he told Job, “And I only am escaped to tell thee.”
Day after day, some new tale of woe comes out of the credit markets and leaks its way into the real economy. Who will escape? We will ask gold tonight when we see it.
Markets and Money