By MICHAEL GRAY
Despite the alphabet soup of bailouts, whether its TARP, TALF or TALC (which is the powder you want to keep dry) there is a huge amount of stealth rescues going on in the process.
The Obama Administration –– specifically Larry Summers –– has taken the tack, that since Congress has the populous view that fixing Wall St. is not fixing Main St., they need to use AIG as government-owned shell company in order to bailout insolvent financial institutions.
AIG, formerly run by Hank Greenberg, should be very comfortable working with Uncle Sam since the company has long been rumored to be a covert-operations friendly firm to America’s spy chiefs.
When the large banks came out and said they were seeing profits in January and February, those profits were directly on the backs of taxpayers through AIG unwinding credit-default swaps in very accommodating trades to the banks.
The administration sees this as “quantative rescuing” the banks without asking for more cash from Congress.
Yesterday’s news that the aviation-leasing unit of AIG was to get a $5B line-of-credit from Ben Bernanke’s helicopter unit was the icing on the cake.
GOLD NOT BUGGED
Gold has taken it on the chin recently, for all the wrong reasons.
Since the end of March, global finance ministers and central bankers have attempted to cut the legs out from under gold for fear of increased demand by investors.
Rumblings prior to the G-20 meeting by China and Russia about replacing the dollar as the world’s reserve currency, which should have been gold positive, was immediately followed up by the European central bank’s sale of 40+ tons of gold.
Now days after the G-20 meeting ended in London a small overlooked portion of the communiqué states that the G-20 agreed to look at the IMF issuing Special Drawing Rights, which was created in 1969 as an accounting unit between the IMF and member nations, as an alternative to the dollar.
To offset this bullish move for gold the IMF stated it was seeking to liquidate 400+ tons of gold. Again, don’t look behind the curtain, as the great Oz would say.
As of Wednesday morning gold is inching its way back to the $900 level, which in itself is a testament to its viability. With so much price-suppressive news I am surprised gold is not trading close to $800.
Should anyone think dollar weakness, which is certainly to be the trend going forward for a number of reasons, is bullish for gold $900 seems to be a cheap level to get into buying gold. Not ETFs but the physical bars and coins.
For more on Wall and Washington and the cratering economy see: http://mgray12.wordpress.com