Comrade Bernanke Does it Again

[hipmatt]

http://www.europac.net/externalframeset.asp?from=home&id=14031

by Peter Schiff

By nationalizing nearly 80% of AIG for $85 billion, the Fed is doing a lot more than simply flushing taxpayer money down the toilet. The greater wrong is allowing the agency that has the power to print money to take control of a private enterprise, especially without the approval of the company’s shareholders. The move represents the largest lurch toward socialism that this country has ever seen, and signals the end of the vibrancy of America’s once vaunted free market economy. Since there is no limit to the amount of money the Fed can create, there is no limit to the number of assets they can acquire.

The “line in the sand” that the Government seemed to draw by refusing to bail out Lehman Brothers was erased in just two days by the very next wave of financial panic.

While Fannie and Freddie were arguably quasi-government agencies that deserved special protection, no such status exists with AIG. Where does the Fed get the authority to use the money it prints to take over private companies? Congress never gave such authority and, even if it had, it would be unconstitutional, as Congress itself has no such authority to delegate. What about the shareholders? Why didn’t they get to vote on this acquisition? Whatever happened to private property rights?

Where does this stop? What other troubled companies will the Fed nationalize, and how much will it cost? Why stop at troubled companies? If the Fed can buy into a sick company, why not a healthy one? Now that we have allowed the Fed to take over any asset it wants, private property rights are meaningless. When oil prices get really high, why bother with a windfall profits tax when the Fed can simply nationalize Exxon-Mobil with a few cranks on its printing press. Who needs Bolsheviks when you have the Fed?

AIG is not a bank; it is not even an investment bank. The “lender of last resort” power was supposed to apply only to banks, to prevent runs. It was not meant to apply to any company that had been declared “too big to fail”.

I suppose the Fed is trying to get around some of the more obvious illegalities by having the new AIG shares issued on behalf of the Treasury. What happened to the concept of an independent Fed? Here you have the Fed seizing a private company and ceding control to the U.S. Treasury. Rather then acting independently, the Fed and the Government are merely partners in crime.

On the economic side, the Fed expects us to believe this is a smart investment. Does anyone really think that officials at the Fed and Treasury are suddenly private equity experts? These are the guys who missed both the tech and housing bubbles, and who assured us that subprime problems were contained. I would not trust them to run a lemonade stand, let alone one of the largest insurance companies in the world.

The idea that this bailout was necessary given that the alternative would be worse should by now be fully discredited. All of today’s financial problems are the direct consequence of Fed policy that was designed to weaken the recession that followed the bursting of the tech bubble and the shock of September 11th. Of course, the tech bubble itself resulted from the Fed’s actions to sooth the pain following the collapse of LTCM, the Russian debt default, the Asian crisis, and Y2K.

I suppose the precedent for all of these actions was established back in 1979 when the government guaranteed Chrysler’s debt. It sure would have been a lot better and a whole lot cheaper if we had simply let Chrysler fail. The road to financial hell, or in this case socialism, is certainly paved with “good” intentions. Today’s historic surge in the price of gold shows that at least a few investors are refusing to march in the parade.

[hipmatt]

any comments? Peter summarizes my thoughts exactly.

[hipmatt]

any comments? Peter summarizes my thoughts exactly.

[hipmatt]

any comments? Peter summarizes my thoughts exactly.

[hipmatt]

any comments? Peter summarizes my thoughts exactly.

[hipmatt]

any comments? Peter summarizes my thoughts exactly.

[hipmatt]

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

http://www.bloomberg.com/apps/news?pid=20601213&sid=awFy4i6wSdmg&refer=home

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

By Stewart Bailey and Millie Munshi
Enlarge Image/Details

Sept. 18 (Bloomberg) — While TV camera crews staked out American International Group Inc.’s Wall Street headquarters following its takeover by the U.S. government, Jules Karp was quietly trading gold coins in “unbelievable” numbers from his basement dealership across the street.

Karp, 61, has traded physical gold, including one-ounce Canadian Maple Leafs, American Eagles and South African Krugerrands, since 1974. Demand has “hit a crescendo,” he said yesterday while an assistant prepared the special packages used to send gold coins to a growing list of mail-order customers.

Investors are being driven to the relative safety of gold as global equities plummet following the federal takeover of AIG, the largest U.S. insurer by assets, and the bankruptcy of Lehman Brothers Holdings Inc., once the fourth-largest U.S. securities firm. Amid the fallout yesterday, Goldman Sachs Group Inc. and Morgan Stanley, the biggest U.S. securities firms, plunged the most ever in New York trading.

“People are panicking right now,” said Karp, who also sources coins for the clients of Wall Street’s largest banks. “They’re afraid for their money.”

The interest in bullion appears widespread. Gold sales to new clients at Blanchard & Co., the largest U.S. precious-metal retailer, have jumped more than sixfold in the past three days as investors responded to the financial turmoil.

“People are looking for answers,” said David Beahm, a vice president at New Orleans-based Blanchard. “People want to protect their wealth and their assets, and gold is the best way for them to do that.”

Gold Skyrockets

The purchases by retail investors mirrored trading yesterday on the New York Mercantile Exchange’s Comex division, where gold gained the most in almost nine years. Suppliers of coins and bullion have been struggling to keep pace with the surge in demand from investors.

“We’re having a hard time” making enough coins, Michael White, a spokesman for the U.S. Mint in Washington, said yesterday in an interview. “There’s very high demand across the market for gold.”

Gold futures for December delivery gained $70, or 9 percent, to $850.50 an ounce yesterday on the Comex, the biggest percentage gain for a most-active contract since September 1999.

Gold producers’ shares also surged. Barrick Gold Corp., the world’s largest gold producer, jumped 14 percent in Toronto trading, while Newmont Mining Corp., the biggest U.S. producer, climbed 9.4 percent in New York, the most in 10 months.

Hard Assets

Depositors fearing bank collapses are turning cash into hard assets, said Richard Smith, president of Phoenix-based Onlygold.com, an online bullion dealership. Many don’t want their savings in any one bank to exceed the $100,000 threshold guaranteed by the Federal Deposit Insurance Corp., he said.

“I’ve been selling gold for eight years and I’ve never seen anything like what I’ve seen in the last seven business days,” Smith said yesterday in a telephone interview. “It’s just been gangbusters for us.”

Since 2003, the value of gold purchases jumped almost fourfold, representing the strongest source of growth in demand, the World Gold Council said on its Web site. Investment attracted net inflows of about $15 billion last year, the industry body said.

“There is no doubt that identifiable investment demand in gold has increased considerably in recent years,” the World Gold Council said.

Record in March

The precious metal reached a record $1,033.90 an ounce in March after the Federal Reserve slashed interest rates, sending the dollar to an all-time low against the euro. Gold subsequently dropped as the dollar strengthened and commodity indexes liquidated their positions. Newmont Chief Executive Officer Richard T. O’Brien said last month the price will probably top its March record in the next year.

Gold wasn’t the only place investors were putting their money this week. While about $3.6 trillion of market value was erased from global stocks, yields on three-month Treasury bills sank to a 54-year low as investors sought the safety of government debt.

“You don’t want to go to bed on Friday evening and come back on Monday and have your investments worth zero,” Blanchard’s Beahm said. “I’m not sure you can get any more economic turmoil than what you’ve seen in the last 72 hours. It’s perfect for gold investors.”

[hipmatt]

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

http://www.bloomberg.com/apps/news?pid=20601213&sid=awFy4i6wSdmg&refer=home

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

By Stewart Bailey and Millie Munshi
Enlarge Image/Details

Sept. 18 (Bloomberg) — While TV camera crews staked out American International Group Inc.’s Wall Street headquarters following its takeover by the U.S. government, Jules Karp was quietly trading gold coins in “unbelievable” numbers from his basement dealership across the street.

Karp, 61, has traded physical gold, including one-ounce Canadian Maple Leafs, American Eagles and South African Krugerrands, since 1974. Demand has “hit a crescendo,” he said yesterday while an assistant prepared the special packages used to send gold coins to a growing list of mail-order customers.

Investors are being driven to the relative safety of gold as global equities plummet following the federal takeover of AIG, the largest U.S. insurer by assets, and the bankruptcy of Lehman Brothers Holdings Inc., once the fourth-largest U.S. securities firm. Amid the fallout yesterday, Goldman Sachs Group Inc. and Morgan Stanley, the biggest U.S. securities firms, plunged the most ever in New York trading.

“People are panicking right now,” said Karp, who also sources coins for the clients of Wall Street’s largest banks. “They’re afraid for their money.”

The interest in bullion appears widespread. Gold sales to new clients at Blanchard & Co., the largest U.S. precious-metal retailer, have jumped more than sixfold in the past three days as investors responded to the financial turmoil.

“People are looking for answers,” said David Beahm, a vice president at New Orleans-based Blanchard. “People want to protect their wealth and their assets, and gold is the best way for them to do that.”

Gold Skyrockets

The purchases by retail investors mirrored trading yesterday on the New York Mercantile Exchange’s Comex division, where gold gained the most in almost nine years. Suppliers of coins and bullion have been struggling to keep pace with the surge in demand from investors.

“We’re having a hard time” making enough coins, Michael White, a spokesman for the U.S. Mint in Washington, said yesterday in an interview. “There’s very high demand across the market for gold.”

Gold futures for December delivery gained $70, or 9 percent, to $850.50 an ounce yesterday on the Comex, the biggest percentage gain for a most-active contract since September 1999.

Gold producers’ shares also surged. Barrick Gold Corp., the world’s largest gold producer, jumped 14 percent in Toronto trading, while Newmont Mining Corp., the biggest U.S. producer, climbed 9.4 percent in New York, the most in 10 months.

Hard Assets

Depositors fearing bank collapses are turning cash into hard assets, said Richard Smith, president of Phoenix-based Onlygold.com, an online bullion dealership. Many don’t want their savings in any one bank to exceed the $100,000 threshold guaranteed by the Federal Deposit Insurance Corp., he said.

“I’ve been selling gold for eight years and I’ve never seen anything like what I’ve seen in the last seven business days,” Smith said yesterday in a telephone interview. “It’s just been gangbusters for us.”

Since 2003, the value of gold purchases jumped almost fourfold, representing the strongest source of growth in demand, the World Gold Council said on its Web site. Investment attracted net inflows of about $15 billion last year, the industry body said.

“There is no doubt that identifiable investment demand in gold has increased considerably in recent years,” the World Gold Council said.

Record in March

The precious metal reached a record $1,033.90 an ounce in March after the Federal Reserve slashed interest rates, sending the dollar to an all-time low against the euro. Gold subsequently dropped as the dollar strengthened and commodity indexes liquidated their positions. Newmont Chief Executive Officer Richard T. O’Brien said last month the price will probably top its March record in the next year.

Gold wasn’t the only place investors were putting their money this week. While about $3.6 trillion of market value was erased from global stocks, yields on three-month Treasury bills sank to a 54-year low as investors sought the safety of government debt.

“You don’t want to go to bed on Friday evening and come back on Monday and have your investments worth zero,” Blanchard’s Beahm said. “I’m not sure you can get any more economic turmoil than what you’ve seen in the last 72 hours. It’s perfect for gold investors.”

[hipmatt]

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

http://www.bloomberg.com/apps/news?pid=20601213&sid=awFy4i6wSdmg&refer=home

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

By Stewart Bailey and Millie Munshi
Enlarge Image/Details

Sept. 18 (Bloomberg) — While TV camera crews staked out American International Group Inc.’s Wall Street headquarters following its takeover by the U.S. government, Jules Karp was quietly trading gold coins in “unbelievable” numbers from his basement dealership across the street.

Karp, 61, has traded physical gold, including one-ounce Canadian Maple Leafs, American Eagles and South African Krugerrands, since 1974. Demand has “hit a crescendo,” he said yesterday while an assistant prepared the special packages used to send gold coins to a growing list of mail-order customers.

Investors are being driven to the relative safety of gold as global equities plummet following the federal takeover of AIG, the largest U.S. insurer by assets, and the bankruptcy of Lehman Brothers Holdings Inc., once the fourth-largest U.S. securities firm. Amid the fallout yesterday, Goldman Sachs Group Inc. and Morgan Stanley, the biggest U.S. securities firms, plunged the most ever in New York trading.

“People are panicking right now,” said Karp, who also sources coins for the clients of Wall Street’s largest banks. “They’re afraid for their money.”

The interest in bullion appears widespread. Gold sales to new clients at Blanchard & Co., the largest U.S. precious-metal retailer, have jumped more than sixfold in the past three days as investors responded to the financial turmoil.

“People are looking for answers,” said David Beahm, a vice president at New Orleans-based Blanchard. “People want to protect their wealth and their assets, and gold is the best way for them to do that.”

Gold Skyrockets

The purchases by retail investors mirrored trading yesterday on the New York Mercantile Exchange’s Comex division, where gold gained the most in almost nine years. Suppliers of coins and bullion have been struggling to keep pace with the surge in demand from investors.

“We’re having a hard time” making enough coins, Michael White, a spokesman for the U.S. Mint in Washington, said yesterday in an interview. “There’s very high demand across the market for gold.”

Gold futures for December delivery gained $70, or 9 percent, to $850.50 an ounce yesterday on the Comex, the biggest percentage gain for a most-active contract since September 1999.

Gold producers’ shares also surged. Barrick Gold Corp., the world’s largest gold producer, jumped 14 percent in Toronto trading, while Newmont Mining Corp., the biggest U.S. producer, climbed 9.4 percent in New York, the most in 10 months.

Hard Assets

Depositors fearing bank collapses are turning cash into hard assets, said Richard Smith, president of Phoenix-based Onlygold.com, an online bullion dealership. Many don’t want their savings in any one bank to exceed the $100,000 threshold guaranteed by the Federal Deposit Insurance Corp., he said.

“I’ve been selling gold for eight years and I’ve never seen anything like what I’ve seen in the last seven business days,” Smith said yesterday in a telephone interview. “It’s just been gangbusters for us.”

Since 2003, the value of gold purchases jumped almost fourfold, representing the strongest source of growth in demand, the World Gold Council said on its Web site. Investment attracted net inflows of about $15 billion last year, the industry body said.

“There is no doubt that identifiable investment demand in gold has increased considerably in recent years,” the World Gold Council said.

Record in March

The precious metal reached a record $1,033.90 an ounce in March after the Federal Reserve slashed interest rates, sending the dollar to an all-time low against the euro. Gold subsequently dropped as the dollar strengthened and commodity indexes liquidated their positions. Newmont Chief Executive Officer Richard T. O’Brien said last month the price will probably top its March record in the next year.

Gold wasn’t the only place investors were putting their money this week. While about $3.6 trillion of market value was erased from global stocks, yields on three-month Treasury bills sank to a 54-year low as investors sought the safety of government debt.

“You don’t want to go to bed on Friday evening and come back on Monday and have your investments worth zero,” Blanchard’s Beahm said. “I’m not sure you can get any more economic turmoil than what you’ve seen in the last 72 hours. It’s perfect for gold investors.”

[hipmatt]

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

http://www.bloomberg.com/apps/news?pid=20601213&sid=awFy4i6wSdmg&refer=home

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

By Stewart Bailey and Millie Munshi
Enlarge Image/Details

Sept. 18 (Bloomberg) — While TV camera crews staked out American International Group Inc.’s Wall Street headquarters following its takeover by the U.S. government, Jules Karp was quietly trading gold coins in “unbelievable” numbers from his basement dealership across the street.

Karp, 61, has traded physical gold, including one-ounce Canadian Maple Leafs, American Eagles and South African Krugerrands, since 1974. Demand has “hit a crescendo,” he said yesterday while an assistant prepared the special packages used to send gold coins to a growing list of mail-order customers.

Investors are being driven to the relative safety of gold as global equities plummet following the federal takeover of AIG, the largest U.S. insurer by assets, and the bankruptcy of Lehman Brothers Holdings Inc., once the fourth-largest U.S. securities firm. Amid the fallout yesterday, Goldman Sachs Group Inc. and Morgan Stanley, the biggest U.S. securities firms, plunged the most ever in New York trading.

“People are panicking right now,” said Karp, who also sources coins for the clients of Wall Street’s largest banks. “They’re afraid for their money.”

The interest in bullion appears widespread. Gold sales to new clients at Blanchard & Co., the largest U.S. precious-metal retailer, have jumped more than sixfold in the past three days as investors responded to the financial turmoil.

“People are looking for answers,” said David Beahm, a vice president at New Orleans-based Blanchard. “People want to protect their wealth and their assets, and gold is the best way for them to do that.”

Gold Skyrockets

The purchases by retail investors mirrored trading yesterday on the New York Mercantile Exchange’s Comex division, where gold gained the most in almost nine years. Suppliers of coins and bullion have been struggling to keep pace with the surge in demand from investors.

“We’re having a hard time” making enough coins, Michael White, a spokesman for the U.S. Mint in Washington, said yesterday in an interview. “There’s very high demand across the market for gold.”

Gold futures for December delivery gained $70, or 9 percent, to $850.50 an ounce yesterday on the Comex, the biggest percentage gain for a most-active contract since September 1999.

Gold producers’ shares also surged. Barrick Gold Corp., the world’s largest gold producer, jumped 14 percent in Toronto trading, while Newmont Mining Corp., the biggest U.S. producer, climbed 9.4 percent in New York, the most in 10 months.

Hard Assets

Depositors fearing bank collapses are turning cash into hard assets, said Richard Smith, president of Phoenix-based Onlygold.com, an online bullion dealership. Many don’t want their savings in any one bank to exceed the $100,000 threshold guaranteed by the Federal Deposit Insurance Corp., he said.

“I’ve been selling gold for eight years and I’ve never seen anything like what I’ve seen in the last seven business days,” Smith said yesterday in a telephone interview. “It’s just been gangbusters for us.”

Since 2003, the value of gold purchases jumped almost fourfold, representing the strongest source of growth in demand, the World Gold Council said on its Web site. Investment attracted net inflows of about $15 billion last year, the industry body said.

“There is no doubt that identifiable investment demand in gold has increased considerably in recent years,” the World Gold Council said.

Record in March

The precious metal reached a record $1,033.90 an ounce in March after the Federal Reserve slashed interest rates, sending the dollar to an all-time low against the euro. Gold subsequently dropped as the dollar strengthened and commodity indexes liquidated their positions. Newmont Chief Executive Officer Richard T. O’Brien said last month the price will probably top its March record in the next year.

Gold wasn’t the only place investors were putting their money this week. While about $3.6 trillion of market value was erased from global stocks, yields on three-month Treasury bills sank to a 54-year low as investors sought the safety of government debt.

“You don’t want to go to bed on Friday evening and come back on Monday and have your investments worth zero,” Blanchard’s Beahm said. “I’m not sure you can get any more economic turmoil than what you’ve seen in the last 72 hours. It’s perfect for gold investors.”

[hipmatt]

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

http://www.bloomberg.com/apps/news?pid=20601213&sid=awFy4i6wSdmg&refer=home

Gold Coins, Bullion Sales Go `Gangbusters’ as AIG, Lehman Fall

By Stewart Bailey and Millie Munshi
Enlarge Image/Details

Sept. 18 (Bloomberg) — While TV camera crews staked out American International Group Inc.’s Wall Street headquarters following its takeover by the U.S. government, Jules Karp was quietly trading gold coins in “unbelievable” numbers from his basement dealership across the street.

Karp, 61, has traded physical gold, including one-ounce Canadian Maple Leafs, American Eagles and South African Krugerrands, since 1974. Demand has “hit a crescendo,” he said yesterday while an assistant prepared the special packages used to send gold coins to a growing list of mail-order customers.

Investors are being driven to the relative safety of gold as global equities plummet following the federal takeover of AIG, the largest U.S. insurer by assets, and the bankruptcy of Lehman Brothers Holdings Inc., once the fourth-largest U.S. securities firm. Amid the fallout yesterday, Goldman Sachs Group Inc. and Morgan Stanley, the biggest U.S. securities firms, plunged the most ever in New York trading.

“People are panicking right now,” said Karp, who also sources coins for the clients of Wall Street’s largest banks. “They’re afraid for their money.”

The interest in bullion appears widespread. Gold sales to new clients at Blanchard & Co., the largest U.S. precious-metal retailer, have jumped more than sixfold in the past three days as investors responded to the financial turmoil.

“People are looking for answers,” said David Beahm, a vice president at New Orleans-based Blanchard. “People want to protect their wealth and their assets, and gold is the best way for them to do that.”

Gold Skyrockets

The purchases by retail investors mirrored trading yesterday on the New York Mercantile Exchange’s Comex division, where gold gained the most in almost nine years. Suppliers of coins and bullion have been struggling to keep pace with the surge in demand from investors.

“We’re having a hard time” making enough coins, Michael White, a spokesman for the U.S. Mint in Washington, said yesterday in an interview. “There’s very high demand across the market for gold.”

Gold futures for December delivery gained $70, or 9 percent, to $850.50 an ounce yesterday on the Comex, the biggest percentage gain for a most-active contract since September 1999.

Gold producers’ shares also surged. Barrick Gold Corp., the world’s largest gold producer, jumped 14 percent in Toronto trading, while Newmont Mining Corp., the biggest U.S. producer, climbed 9.4 percent in New York, the most in 10 months.

Hard Assets

Depositors fearing bank collapses are turning cash into hard assets, said Richard Smith, president of Phoenix-based Onlygold.com, an online bullion dealership. Many don’t want their savings in any one bank to exceed the $100,000 threshold guaranteed by the Federal Deposit Insurance Corp., he said.

“I’ve been selling gold for eight years and I’ve never seen anything like what I’ve seen in the last seven business days,” Smith said yesterday in a telephone interview. “It’s just been gangbusters for us.”

Since 2003, the value of gold purchases jumped almost fourfold, representing the strongest source of growth in demand, the World Gold Council said on its Web site. Investment attracted net inflows of about $15 billion last year, the industry body said.

“There is no doubt that identifiable investment demand in gold has increased considerably in recent years,” the World Gold Council said.

Record in March

The precious metal reached a record $1,033.90 an ounce in March after the Federal Reserve slashed interest rates, sending the dollar to an all-time low against the euro. Gold subsequently dropped as the dollar strengthened and commodity indexes liquidated their positions. Newmont Chief Executive Officer Richard T. O’Brien said last month the price will probably top its March record in the next year.

Gold wasn’t the only place investors were putting their money this week. While about $3.6 trillion of market value was erased from global stocks, yields on three-month Treasury bills sank to a 54-year low as investors sought the safety of government debt.

“You don’t want to go to bed on Friday evening and come back on Monday and have your investments worth zero,” Blanchard’s Beahm said. “I’m not sure you can get any more economic turmoil than what you’ve seen in the last 72 hours. It’s perfect for gold investors.”

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