Wednesday, October 1, 2008

TARP ver. 2.0 to the Rescue?

Changing accounting rules may prevent a Technical Knock-Out (TKO) on pumpkin day, but it only boosts the books, not the cash, and not the willingness to lend from bank to bank. In fact it may even decrease the interbank lending because reality has just become a little more opaque.

This is a great article from Chris Laird of the Prudent Squirrel, which explains why TARP II will not work, and what we can expect in the coming months:

Link --> Deleveraging, Debt Deflation, Gold

"You can track all the major movements in the gold market since August 07 with developments in the credit crisis."

FOFOA: Just like Connecting the Dots below.

"That is because gold is cash par excellence. Even though gold has an exasperating $100 price volatility week to week, it’s the final place of safety for cash worldwide. So, flight to cash and liquidity finds its way to gold ultimately. People know that, despite a rallying USD, gold ultimately will be the safest place for cash.

The investing mantra, that the world economy will drive basic commodities relentlessly up, is what we heard for the last 5 years, but the markets are saying that is old hat. What’s new hat is a contracting world economy and debt deflation. But it’s typical for the economic commentary and thinking to be 6 months behind seeing the obvious...

FOFOA: Or how about 10 years ahead? Is this not exactly how Another and FOA described it going down?

"So, for the moment, the USD and gold rise together."


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