Oh, so you thought that the torrent of criticism directed at US Congressmen for voting ‘no’ on the bail-out meant that Senators would be more likely to vote yes tonight, and that this would finally bring some reprieve?
Well, Javier Blas at the FT has news for you: the world’s super-rich don’t share your optimism.
Investors in gold are demanding “unprecedented” amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen. Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.
“There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career,” said Jeremy Charles, chairman of the LBMA. “The gold refineries cannot produce enough bars.” The move comes as fears grow among investors over the losses at investment vehicles previously considered almost risk-free, such as money funds. Philip Clewes-Garner, associate director of precious metals at HSBC, added that investors were not flying into gold simply because they saw it as a haven amid Wall Street’s woes. “It is a flight into gold because it is a physical asset,” he said.
Well, that’s a vote of confidence, eh readers? They’ve probably been perusing Nouriel Roubini, who reckons (bailout prospects notwithstanding) that “we are now back to the risk of a total systemic financial meltdown”:
The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions; such a silent cross border bank run has already started as foreign banks are worried about the solvency of US banks and are starting to reduce their exposure. And if this run accelerates – as it may now – a total meltdown of the US financial system could occur.
We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.
Doom, gloom. Still, readers may also like to be aware that in noting the ongoing travails of Morgan Stanley and Goldman Sachs, Nouriel suggests that “the only institution sound enough to swallow Goldman may be HSBC”. Another reason – as though one were needed! – why those of us who bank with HSBC’s lovely First Direct can shake our heads in bewilderment at those of you who choose not to.
Now, if they only offered safe deposit boxes…
