E.D.Hart

Why Citi's Failure Costs More than Saving It Does

An analogy is that it costs less put out the fire of a burning building than it does to let it burn to the ground.

GM we might let fail because failure of GM wont start a global bonfire.

Letting Citi fail is akin to letting a citiblock burn to the ground and then spread to other blocks, throughout the cirty...except in this case the city is global banking and credit institutions.

The government is not communist...they are trying to prevent this fire from spreading further than it already has. Let them fail sounds great, and makes great sound bites...and is ideologically consistent with free market capitalism...but it is utterly pragmatic.

If my neighbors kid is playing with matches under his porch and the kid sets the house on fire...by golly I want to help put that fire out even though this might be a moral hazard issue (darn that kid..lets teach that family a lesson!!!)

Enlightened self interest if nothing else compels me to do whatever it takes to put out that fire...if I think my house could catch fire too.

Investors Staying Away from Banks; Gold Attempts to Break Downtrend

Wow, Ive seen that chart before Chris, but it is good to be reminded of what can happen--twenty years of flat to falling markets.

Now that weve likely seen the end of (or nearly so) falling interest rates, the next decade or so looks like we may have in store higher rates and higher inflation (after defaltionary hurricane has passed). Currently, by some accounts we have negative interest rates.

Gold does well when interst rates are below or close to inflation, and the threat of you principal being erroded is greater than the reward of the interest paid.

The 1970s were good for gold because inflation was above interest rates much of the time, until Volker broke inflations back.

1980s through 2000 (roughly) interest rates were falling along with inflation. It didnt pay to hold gold as equities did well, and interest bearing bonds did better than inflation.

Going forward this is likely to be reversed --equities and bonds will likely falter and gold will outperform again for ten years or longer.
Just a thought. IMHO.