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Monday, October 06, 2008

Another Monday, Another Meltdown

Today, global markets in Asia and Europe sold off hard, and Wall Street faces more troubles dead ahead. But you want to know what’s looking good today? Gold!

Gold recovers as flight to safety balances dollar

Prices are being supported by strong investment demand for gold coins and bars, traders say, as well as money pouring into in bullion-backed exchange traded funds.

In other news ...

Report: UK Government Considering Plan to Recapitalize Banks

Alistair Darling, the Chancellor, could give the banks billions of pounds in return for shares in an emergency bailout plan to be enacted if the financial crisis worsens, The Daily Telegraph has learnt.

Note -- This is more like the Swedish solution, or the RFC in the U.S. during the Depression, as opposed to Paulson’s cockamamie TARP plan.

In other news, Germany has guaranteed private bank accounts, following the path laid down by Ireland and Greece.

The worse the US does, the better the dollar does …

Drossos and Nie note that US banks have grown reluctant to lend to banks abroad — and many banks abroad have significant holdings of dollar debt and thus need dollar financing.

The solution to a world where US banks won’t lend to the global funding market? Simple, the US central bank lends dollars to European central banks who lend dollars to their banks — dollars that European banks can no longer get from US banks. Call it cross-border central bank intermediation. this is why the Fed has, in some sense, become a global lender of last resort.

We still don’t know what will happen once the forced buyers of dollars by actors scrambling to repay dollar debts ends. The US will likely still have a sizeable external deficit that needs to be financed for a while longer, which could drag the dollar down. On the other hand, the US won’t be the only country in a recession.

Bernanke May See Lending to Companies, States as Next Credit-Crisis Fronts Federal Reserve Chairman Ben S. Bernanke may find the next fronts of the financial crisis to be just as chilling as last month's downfall of Wall Street titans: its spread to corporate America and state and local governments.


Commodities R.I.P. as Disappearing Leverage Reduces Futures Contracts 26% Commodities markets are heading for the biggest annual decline since 2001 as investors exit leveraged bets and slowing economic growth erodes demand for raw materials.

Crude Oil Falls Below $90 on Concern Slowing Global Growth May Curb Demand Crude oil fell below $90 a barrel in New York for the first time since February as the credit crisis deepened in Europe, adding to concerns that global economic growth will slow and reduce demand for fuels.

Soybeans Drop to 1-Year Low on Worsening Demand Outlook; Corn, Wheat Fall Soybeans tumbled to the lowest in almost a year and corn dropped on signs slowing global economic growth, the dollar's strength and declining energy costs will reduce demand for the crops used in food, feed and fuel.

Copper, Zinc, Aluminum Tumble by Trading Limit in Shanghai After Holidays Copper, zinc and aluminum plunged by the exchange-imposed daily limit in Shanghai, catching up with losses on international markets in the past week when China's exchanges were closed for holidays.

And yes, I know the coding is screwed up, but there's no time to fix it.

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