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The GoldBugg Report - Gold Rebounds on Weak Dollar

March 25, 2008

In this week's GoldBugg Report:

-Gold Rebounds on Weak Dollar

-Paul urges gold standard, abolition of Fed on CNBC

-Ted Butler: All into silver now

-Gold Rebounds on Weak Dollar

http://ap.google.com/article/ALeqM5jND4r3B-VBZu2Ogg2_yzjYnPIP8gD8VKJFNO0

-Paul urges gold standard, abolition of Fed on CNBC

http://www.gata.org/node/6165

-Ted Butler: All into silver now

http://www.gata.org/node/6163

-Chart of the Day. Gold has been in a strong bull market since 2001 and picked up the pace in mid-2005 and then again in mid-2007. In fact, gold has gone parabolic and today briefly crossed the $1000 per ounce level for the first time. Today's chart illustrates how the price of gold has nearly quadrupled during its seven year bull market. Chartoftheday.com

-Greenspan: Economy worst since WWII. U.S. financial crisis to continue for months, says former Fed chairman. Today's economic condition could likely be seen as "the most wrenching since the end of the second world war," wrote former Federal Reserve chairman Alan Greenspan in the Financial Times on Monday. The U.S. financial crisis won't end until housing prices stabilize, but that won't happen for months, wrote Greenspan.

The models used by the finance industry to determine risk and measure economic strength are too simple to fully account for human responses, he said. "We cannot hope to anticipate the specifics of future crises with any degree of confidence," he wrote. However, Greenspan said that he hoped the fallout would not take away the finance industry's ability to regulate itself.

Market flexibility and free competition are the most reliable safeguards against economic trouble, he said; the system which is supposed to guard against unanticipated losses will need to be overhauled. Cnnmoney.com-Read more at-http://www.france24.com/en/20080317-current-crisis-most-wrenching-1945-greenspan-financial-global-economy&navi=ECONOMIE

-Deflation. A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression.

Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind. Investopedia.com

-Dead Cat Bounce. A temporary recovery from a prolonged decline or bear market, after which the market continues to fall. Ever heard the saying, "Even a dead cat will bounce if dropped from high enough!" Investopedia.com

-Ignore the siren call of the complacent as this looks more than likely to be another dead cat bounce in equity markets and another brief sojourn of financial calm prior to the next act in the epic unfolding global financial crisis. Unfortunately, the drama looks soon to increase, intensify and degenerate from high farce to tragedy. Gold.ie

-Stock Veterans Granville, Stovall Predict More Losses. Joseph Granville and Robert Stovall, octogenarians who've seen every financial market downturn since the 1950s, say the current one may be the worst and is far from over. Granville, born in 1923, remembers his banker father's bad moods following the stock-market crash of 1929.

The younger Granville began his career at defunct brokerage E.F. Hutton in 1957, quit in 1963 to begin publishing a weekly newsletter and wrote nine books on investing. ``We're in a crash,'' Granville, 84, said in a telephone interview from Kansas City, Missouri, where he lives and works. ``This is the worst I've seen, and I've studied every bit of history all my life.''

``I don't see an end to this thing until sometime in 2009,'' Granville said of the current market slump. ``It's going to get a lot worse before it gets better.'' Read more at-

http://www.bloomberg.com/apps/news?pid=20601087&sid=awGilvqsJv7M&refer=home

-Insurer Losses From Subprime Approach Katrina Claims. Read more at-

http://bloomberg.com/apps/news?pid=20601206&sid=aH4bWZasxTUo&refer=realestate

-Canadian economic growth seen at only 1.1% this year: TD. Read more here-http://www.cbc.ca/money/story/2008/03/19/canadianeco.html or http://www.bloomberg.com/apps/news?pid=20601082&sid=aSdi5Vd9fj58&refer=canada

GOLD

-Spot gold could face further profit-taking in the short term but the prospect of lower U.S. interest rates in the mid-to-longer-term paints a negative picture for the dollar and a bullish one for the precious metal, said TheBullionDesk's James Moore. This supports the view that gold will challenge $1,250/oz in 2008, Moore added. Dow Jones

-Although traditionally a safe haven against volatile stock markets, inflation and a hedge against a weak US dollar, Ross Norman, director of TheBullionDesk.com, explained that when "things are very, very bad, gold suffers too." He added: "There has been a sharp sell off in all metals. It is a case of selling off the good to make up for the bad." Gold prices have risen 20pc to date this year, and 50pc since last August, leaving investors sitting on a handsome profit. Mr. Norman said: "Investors are just taking money off the table."

Mr. Norman anticipating a further rise of 25pc for gold probably in the third or fourth quarter. He said: "I wouldn't bail out. This is quite a healthy correction it's the first dip in an awfully long time. "All the fundamentals are still there: the market fear factor, the subprime disaster, the ongoing dollar weakness, the supply/demand balance. "It's an opportunity to get in." Telegraph.co.uk

-$2,000 an ounce gold is in the cards. Frank Holmes, chief executive officer at U.S. Global Investors, says that gold will hit $2,000 an ounce and that while the move won't be straight there from current levels investors should not be surprised by it. Holmes noted that virtually all commodities have gone through their "inflation-adjusted 1980 price levels," with the notable exception of gold, and that to get to that range the price of gold would have to top $2,000 an ounce.

Holmes said he expects a short-term pull-back in gold based on a correction he sees coming in oil and a short rally in the dollar, both of which will impact gold prices but that the long-term trend will be strongly upward. In a radio interview with Chuck Jaffe, MarketWatch senior columnist, Holmes noted that gold correlates to the price of oil 90% of the time meaning it moves with oil prices almost all the time and has an inverse relation to the dollar 70% of the time.

With oil prices on the rise and the dollar weakening, it's a market condition that bodes well for gold, especially because gold is "not at astronomical levels yet, when compared to other commodities. There's a lot more room." Holmes also noted that he's more concerned with the market entering a "big deflationary cycle" than he is about Federal Reserve rate cuts sparking inflation, noting that "inflation is easy to stop." Marketwatch.com

-Analyst: Faltering market conditions could push gold to $1,800/oz within year. Gold could reach $1,800 an ounce within the year as investors turn to the yellow metal for shelter amid deterioration in capital markets, an analyst said Monday. In the shadow of Sunday's "bailout" of Bear Stearns "conditions in the major financial markets have deteriorated further, which we believe increases the probability of a sharp upward spiral in the gold price," analyst Paradigm Capital Analyst Don MacLean said.

MacLean said he now believes there is a 40% to 50% chance that gold will reach $1,800/oz within a year, up from a previous estimate of a 25% chance back in January. April gold futures were last trading up 60 cents at $1,000.10 an ounce, after reaching a record high of $1,033.90 in intraday trading. In a note to clients MacLean cited the emergence of a confluence of factors that, historically, have pushed the price of gold upward, such as high amounts of liquidity provided by central banks, record high risk spreads, declining interest rates in major economies and a weakening U.S. dollar.

Soaring gold prices also have the effect of drawing more interest in the gold sector, he noted. If the gold price spirals upwards, gold stocks should rise with the metal's price, MacLean said. However, gold stocks are still equities, and broad downward pressure on equities will probably hinder their performance, he said. "Past experience suggests that gold equities will lag, viewing the spiral as unsustainable. In this case the metal is liable to outperform. It would make sense for investors to hold a meaningful portion of their gold position in ETFs for the metal." AFXNews.com

-Gold's fundamentals are as strong as ever as this, the worst financial crisis since the Wall Street Crash and the Great Depression, continues to worsen and deepen. Although Weimar Germany might have more parallels than the deflationary Gold Standard constrained 1930s America. Systemic risk has not been as great as this since after the crash in 1929 and the new fangled massively leveraged global financial system is in danger of unraveling.

While talk of ‘contagion' might be considered alarmist, so would talk of nationalization of Northern Rock and bankruptcy of Bear Stearns some 6 short months ago. Global financial contagion (with its epicentre on Wall Street and in the U.S.) is now a real possibility as acknowledged by Anoop Singh, IMF director for the Western Hemisphere Department. He said yesterday that the mounting global credit crisis could result in financial "contagion" that could wipe $800 billion of value from the books of U.S. and global financial institutions.

He cited a high likelihood of a U.S. recession and said he sees losses from the U.S. subprime mortgage market crisis resulting in widening losses for European banks. That is putting it mildly. Traders and analysts are now looking at the next dominoes to fall with Citigroup and Lehman Brothers in the U.S. and HBOS, Alliance and Leicester and Bradford and Bingley in the UK looking vulnerable.

Unfortunately, financial contagion looks increasingly likely and this would result in many more Northern Rocks and Bear Stearns and the value of many assets becoming worth fractions of their previous worth. A worst case scenario is a massive financial panic resulting in stock and bond market crashing, many runs on banks and the collapse and nationalization of much of the banking system in the western world.

Gold remains the ultimate safe haven and has retained and will retain its value throughout history. Particularly with history having a terrible habit of repeating itself. Blind fate in central bankers and politicians miraculous powers to rectify this situation is dangerous and delusional. Given the current financial crisis, all investors should have an allocation to gold bullion and the allocation should be at least 20% of a properly diversified portfolio. Holding 25% in gold, 25% in cash would be appropriate as an extremely cautious, defensive and prudent investment strategy is merited now more than ever. Gold.ie

-Gold finally accomplished a close above the psychologically-important $1000/oz. mark, leaving investors to ponder the equally psychologically-important question: What now? That's one for which there are probably as many answers as there are people who care enough to offer one. While the tanking dollar and soaring price of oil are playing their parts, few would any longer disagree that the flight into precious metals is being fueled in large part by uneasiness over the disintegration of the world financial sector.

"Gold's assault on $1,000 is happening for a good reason," says James Turk, of GoldMoney.com. "Gold is not only an inflation hedge, it's a catastrophe hedge. Gold is becoming increasingly important as the credit crunch continues to spiral out of control." The latest blow has been the collapse in liquidity at Bear Stearns, one of the biggest names on Wall Street.

"Bear is the first, who is next? That question is haunting investors right now and they are looking for a flight to quality," said Zachary Oxman of Wisdom Financial. That flight is now so furious that it's battering down barriers such as that noted by James Burton, CEO of the World Gold Council, who wrote that the price escalation has "posed a short-term problem in regard to consumer purchases of jewelry, gold bars and coins, acting as a disincentive to some buyers." Kitco Daily Resource

-John Embry says sit tight, don't let gold's volatility bother you. Read more at-http://www.sprott.com/pdf/investorsdigest/digest.pdf

-Gold hits $1,000, John Embry comments on BNN. Watch video here-http://broadband.bnn.ca/bnn/?vid=38106

-John Embry's address to the Vancouver Resource Investment Conference. Read more here-http://www.sprott.com/pdf/news/2008_Vancouver_Speech.pdf

-Jay Taylor on gold. Watch video here-http://broadband.bnn.ca/bnn/?noad=1&vid=38273

-What the Price of Gold Is Telling Us. Dr. Ron Paul, U.S. Congressman-Read more at-http://news.goldseek.com/RonPaul/1205726520.php

-India's mutual fund firm Benchmark expects its gold exchange-traded fund's (ETF) collection to grow over 10 times to 15 metric tonnes in the next five years, a top official said on Wednesday. "We have grown substantially in terms of tonnage and number of investors," Rajan Mehta, executive director of Benchmark Asset Management said in an interview with Reuters. Read more at-http://in.reuters.com/article/businessNews/idINIndia-32581220080319?rpc=401&

-Torontonians clear out jewelry boxes as gold prices rise. Read more at-http://www.cbc.ca/money/story/2008/03/17/gold-prices.html

SILVER

-Silver is the investment of the century. It will move with gold, but further, as has already been demonstrated. Gold is up about 200%, and silver is up more than 300% over the last couple of years. We will eventually find that silver at today's $15 to $20 is the bargain of the century. Howard Ruff-Read full story at-http://www.kitco.com/ind/ruff/ruff.html

-There is now more reason than ever to own gold and silver. They are continuing to fulfil their function as an inflation hedge, but those who own physical gold and silver are also benefiting in another way they are protected from counterparty risk. In other words, gold and silver are a hedge against financial catastrophe, and more of that is probably on the way. James Turk

-The Telegraph in the UK says: "In the coming few weeks, financial markets face their biggest test since the 1930s. This is not hyperbole." "Given what happened in 1974, there is one piece of advice that I can recommend. If history is any guide and I really do believe that it is then the current banking and counterparty crisis is going to get much worse before it gets better. Years of imprudent reckless lending is taking its toll on the global banking system. There is one last point worth noting. In 1974 gold rose 72.8%, while silver jumped 84.1%." Read full James Turk story at-http://goldmoney.com/en/commentary-print.html

-Importance of Silver and Gold. David Morgan-Read full story at-http://news.silverseek.com/SilverInvestor/1205474400.php

-Why Silver is better than Oil as an Investment. Read more at-http://news.silverseek.com/GoldIsMoney/1205600326.php

-Silver institute news for Q1. Read more here-http://www.silverinstitute.org/news/1q08.pdf

-Ted Butler silver commentary for March 11. Read more at-http://www.investmentrarities.com/03-11-08.html

-Ted Butler silver commentary for March 18. Read more at-http://www.investmentrarities.com/03-18-08.html

-When Do I Sell My Silver? People are always asking me, "When should I sell my silver?" Well that question is much easier to ask than to answer. I often times tell them whenever the government starts acting responsibly and not only balances the budget but finally decides that it has grown too fat and announces they are going on a fiscal diet. Many people want an actual dollar target to write down so that they will know exactly when to get out.

Well since the dollar is shrinking that target number keeps getting bigger. That is exactly the problem with a shrinking yardstick. It is hard to measure something today and for it to have any meaning in the future. So what can we use instead of dollars to measure when to sell our silver? Because make no mistake, there will be a time to sell sometime in the future. Robert Kiyosaki, author of "Rich Dad, Poor Dad" recently stated that he has a large position in silver and plans to exit when his target is met.

He says when the cost of a median priced single family home in the US sells for 500 oz of silver (or 40 oz of gold) he believes it will be time to exit the silver market. Of course he says he will not go back into dollars but most likely trade his silver for undervalued income producing real estate. So in other words he believes silver is still VERY undervalued at this point. As a matter of fact since the average existing single family home is now $218,000 it would take a silver price of $436/oz in today's money for 500 oz of silver to purchase it.

So he is looking for another x 20 rise in silver value before the top is reached ($21 x 20 = $420/oz). Of course do not write $420/oz on the wall as your exit point because by the time we get there in the next 5 to 15 years that amount of federal reserve notes will not mean the same thing. You just have to stop thinking in terms of FRNs or dollars and start thinking in terms of value or what your silver will purchase. Perhaps you may want to think in terms of how much oil your silver will purchase.

In 1980 the average price of a single barrel of oil was equal to a single oz of silver or 1:1. After the 1980 silver price spike for the next 25 years the average price of a barrel of oil was just under 4.5 oz of silver (with a high of 2 to a low of 10). Today it is around 5 oz of silver for one bbl of oil. In the past 3 years the extremes have been a high of 4 to a low of 9 oz of silver per barrel of oil. Even though there has been a lot of volatility in both the oil and silver markets the average has remained around 4 to 6 oz of silver per barrel of oil.

So perhaps the next drop to par with oil or 1:1 it may be time to sell your silver and trade for oil. Currently that would represent an increase of 5 times its current value. Another consideration is the gold / silver ratio. The gold / silver ratio has been between 12 and 17 throughout most of recorded history. Only in my life time has the ratio gotten so out of balance. The high was reached in 1991 when it went up to 91 (1 oz of gold = 91 oz of silver). Since that time it has been trending downward.

Currently the ratio is around 48:1 (1 oz of gold = 48 oz of silver). It is my opinion that the ratio will come back to its traditional value of 15 or 16. Since it has been so far above its ratio it may even overshoot it and drop down somewhere below 10 before it settles back to 15 or so. Therefore a ratio of 10:1 would put silver at $102.50/oz in today's dollars. A ratio of 15:1 would set silver's current price at $68/oz. Another value would be the dow jones industrial average priced in oz of silver.

The low for the DJIA / silver was 18:1 in 1980 (18 oz of silver could buy the DJIA). During the 2000 stock market peak the DJIA / silver was 2,500:1 (yep, it took 2,500 oz of silver to buy the DJIA). Currently it is about 570:1. So if it approached the extreme low of 18:1 then silver would currently have to sell for $665/oz (or 30 times higher). So maybe you should consider selling when the DJIA / silver ratio gets near 20:1. So whether it is 20 times, 5 times or 30 times higher than it is right now I feel fairly confident telling anyone that the time to sell is NOT YET! Buy more and hang on for the ride of your life. Larry LaBorde

PLATINUM-PALLADIUM

-World platinum deficit to surge on production woes. The global platinum market is likely to witness a huge deficit this year and in 2009 as a power crisis in top producer South Africa hits output, while industrial demand remains strong, a Reuters survey showed. The poll of 11 analysts and traders forecast on Wednesday that the median deficit for platinum, used in jewellery and to clean vehicle exhaust fumes, is likely to widen to 470,000 ounces by the end of 2008.

The deficit is seen at 422,500 ounces in 2009. In 2007, total global platinum demand of 6.925 million ounces surpassed supply of 6.660 million, leaving a market deficit of 265,000 ounces. The market had a surplus of 65,000 ounces in 2006 after seven successive years of deficits. Analysts said tight market conditions were expected to put an upward pressure on the price, which hit a record high of $2,290 (U.S.) on March 4. It was quoted at around $1,933 on Wednesday.

"Electricity supply problems in South Africa have altered the outlook for platinum dramatically," said Walter De Wet, precious metals analyst at Standard Bank. "The electricity deficit will be wiped out but, unfortunately, additional capacity doesn't expand in a smooth line, but rather step-wise. For now, demand will outstrip supply," Johannesburg-based Mr. Wet said. South Africa accounts for 80 per cent of the global output. Read more at-http://www.theglobeandmail.com/servlet/story/RTGAM.20080319.wplatinum0319/BNStory/energy/home

COMMODITIES

-Goldman Sees `Explosive' Commodity Rallies, $175 Oil. Read more at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aUmQ3MBOkx_0

OIL-GASOLINE

-IEA: Non-OPEC output decline rates lower than believed. Read more at-http://www.ogj.com/display_article/323394/7/ONART/none/DriPr/1/IEA:-Non-OPEC-output-decline-rates-lower-than-believed/

-U.S. Gasoline price spike has only just begun. Motorists should expect to pay upwards of $3.75 a gallon in the coming weeks as prices at the pump catch up with record crude, but relief may arrive by summer. Read more at-http://money.cnn.com/2008/03/10/news/economy/gas_prices/index.htm?cnn=yes

-Exxon's $12 Billion Venezuela Asset Freeze Overturned. Read more at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ahEO3V_lPHKQ

INFLATION

-Behind Cheaper Credit, Inflation Fears Loom. Read more at-http://www.washingtonpost.com/wp-dyn/content/article/2008/03/18/AR2008031803479.html

-Inflation is Americans' top economic concern. Read more at-

http://money.cnn.com/2008/03/18/news/economy/cnn_poll_inflation/index.htm?postversion=2008031813

-Canada's Annual Inflation Rate Falls to Six-Month Low. Read more at-http://www.bloomberg.com/apps/news?pid=20601082&sid=a57xwz2IBojo&refer=canada

-U.S. Producer Prices Rise 0.3%, Core Measure Climbs. Read more at-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOBtOOloppt4&refer=home

-Vive La France the Road to Hyperinflation. Peter Schiff-Read more at-http://www.321gold.com/editorials/schiff/schiff031408.html

-In light of the cause and effect between monetary inflation and price inflation, and given the clear findings in our Global Inflation Survey, we can only conclude that inflation in both its commonly understood forms is now baked into the proverbial cake.

As investors, that keeps us focused on gold, the world's longest-serving form of money and an investment we have been profitably beating the drum about since 1999. Importantly, a quick scan now finds that gold is rising against a large number of currencies.

This is a very useful view of the current inflation trend in that it demonstrates that the trend has expanded considerably beyond just a weakening U.S. dollar, and is now affecting fiat currencies around the world, almost without exception. Are we seeing the end of the experiment in fiat monetary systems? It's too early to say one way or another, but it's not too late to shift at least some percentage of your portfolio into gold. Read more at-http://news.goldseek.com/DougCasey/1205820360.php

FINANCIAL CRISIS HITTING WORLDWIDE

-Can't Grasp Credit Crisis? Join the Club. Raise your hand if you don't quite understand this whole financial crisis. It has been going on for seven months now, and many people probably feel as if they should understand it. But they don't, not really. The part about the housing crash seems simple enough. With banks whispering sweet encouragement, people bought homes they couldn't afford, and now they are falling behind on their mortgages. Read more at http://www.nytimes.com/2008/03/19/business/19leonhardt.html?_r=1&ei=5088&en=b9d59d01316751bf&ex=1363665600&partner=rssnyt&emc=rss&pagewanted=print&oref=slogin

-Global crisis deepening: IMF Chief. Read more at-

http://money.cnn.com/2008/03/17/news/international/bc.apfn.imf.globaleconom.ap/index.htm

-US economist calls financial crisis worst since 1930s. Read more at-http://economictimes.indiatimes.com/International_Business/Financial_crisis_worst_since_1930s/articleshow/2881608.cms

-Avoid financials says analysts. Friedman Billings Ramsey says investors should forsake shares of most financial institutions until the industry raises $1.2 trillion. Read more at-

http://money.cnn.com/2008/03/17/markets/avoid_financials.ap/index.htm

-Foreign investors veto Fed rescue. Read more at-

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/17/ccview117.xml

-End of Cheap Credit Hits Homes, Businesses. Read more at-

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/17/AR2008031702616_pf.html

-Wall Street turmoil ripples across Main Street. Read more at-http://www.reuters.com/article/idUSN1763551620080318

-Lehman borrows from new Fed facility: report. Read full story at-

http://money.cnn.com/2008/03/17/news/companies/FGIC_earns.ap/index.htm

-Canadian Lawmakers Likely to Review Commercial Paper Collapse. Read more at-http://www.bloomberg.com/apps/news?pid=20601082&sid=aCl.oRRnpszY&refer=canada

BEAR STEARNS COLLAPSE

-March 14-Bear Stearns Gets Emergency Funds From JPMorgan, Fed. Bear Stearns Cos., teetering on the brink of collapse from a lack of cash, got emergency funding from the Federal Reserve and JPMorgan Chase & Co. in the largest government bailout of a U.S. securities firm. After denying earlier this week that access to capital was at risk, Bear Stearns Chief Executive Officer Alan Schwartz said today that the 85-year-old company's cash position had ``significantly deteriorated'' in the past 24 hours.

The central bank agreed to provide financing through JPMorgan for up to 28 days, the bank said in a statement today. A person close to JPMorgan said the bank, led by Chief Executive Officer Jamie Dimon, would be interested in buying Bear Stearns's prime brokerage unit, which provides loans and processes trades for hedge funds. The Fed acted to prevent the failure of the second-biggest underwriter of U.S. mortgage bonds and forestall a potential market panic as losses by banks and brokers reached $195 billion and stocks plunged for a third day this week.

JPMorgan, which has suffered fewer losses than rivals during the credit crisis, may end up owning all or part of Bear Stearns, analysts speculated. ``I don't think they can afford to let Bear go,'' said Charles Geisst, the author of ``100 Years on Wall Street,'' referring to the New York Fed bailout. ``At this particular moment in time, it would be a devastating blow to the markets.'' Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid=arOurF_ov.pk&refer=home

-March 14-Fed Invokes Little-Used Authority to Aid Bear Stearns. Federal Reserve Chairman Ben S. Bernanke invoked a law last used four decades ago to keep Bear Stearns Cos. from collapsing after the securities firm sought emergency funding from the central bank. The loan to Bear Stearns required a vote today by the Fed's Board of Governors because the company isn't a bank, Fed staff officials said.

The central bank is taking on the credit risk from Bear Stearns collateral, lending the funds through JPMorgan Chase & Co. because it's operationally simpler to accomplish than a direct loan, the staff said on condition of anonymity. Bernanke took advantage of little-used parts of Fed law, added in the 1930s and last utilized in the 1960s, that allow it to lend to corporations and private partnerships with a special board vote. The Fed chief probably sought to stave off a deeper blow to the financial system from a Bear Stearns collapse, former Fed researcher Keith Hembre said.

``The Fed really doesn't have any obligation to help a non- bank aside from its role or responsibility to keep the financial markets functioning,'' said Hembre, who helps oversee $107 billion as chief economist at FAF Advisors Inc. in Minneapolis. ``They made a judgment, probably an accurate one, that they're not going to function very well if you've got a full-blown crisis with a major Wall Street firm.'' Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid=abl8CI.8oF8U&refer=home

-JPMorgan Chase to Buy Bear Stearns for $240 Million. Read more at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4qrSYRFeOgI

-JPMorgan scoops up troubled Bear. The deal values Bear Stearns at just $2 a share. Regulators hope purchase will stave off wider chaos in financial markets. Read more at-

http://money.cnn.com/2008/03/16/news/companies/jpmorgan_bear_stearns/index.htm

-How the Bear Stearns deal got done. Without the Fed's $30 billion, JPMorgan Chase couldn't have bought Bear Stearns without writing down its own mortgage holdings. Read more at-

http://money.cnn.com/2008/03/17/news/companies/boyd_bear.fortune/index.htm

-Billionaire Lewis moves to block JP Morgan. Read more at-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/18/cnlewis118.xml

-Bear bailout can't save shareholders. Monday's plunge shows investors can lose their shirts even when the feds decide a firm is 'too big to fail.' Read full story at-

http://money.cnn.com/2008/03/17/news/toobig.fortune/index.htm

-How subprime killed Bear Stearns. A problem with risky mortgages has led to a global financial crisis. The bigger issue: Experts don't know when it will end. Read more at-

http://money.cnn.com/2008/03/17/news/economy/gothere/index.htm

-End of Wall Street as we know it. Financial firms have relied on a highly flawed business model for years. The time has come to fix it. Read more at-

http://money.cnn.com/2008/03/17/magazines/fortune/investing/Tully_WallStIsBroken.fortune/index.htm

-Oops CNBC's Cramer Said 'Don't Move' From Bear a Week Before Collapse. 'Mad Money' host drastically underestimated the investment bank's trouble surrounding the mortgage crisis. Read more at-http://www.businessandmedia.org/articles/2008/20080317110946.aspx

INTEREST RATES

-Canada's Flaherty `Monitoring' U.S. Interest Rates. Read more at-http://www.bloomberg.com/apps/news?pid=20601082&sid=aYmIRUxaWwAw&refer=canada

-Fed Cuts Main Rate to 2.25%, Says Outlook `Weakened'. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid=ahgKoMxfdLIA&refer=home

-March 17-Fed Cuts Discount Rate, Lends More to Avert Meltdown. Read more at-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aWEuJN_P2JpM&refer=home

-The Bank of Japan may cut borrowing costs next month to revive the economy even if the political dispute over the selection of a replacement for Governor Toshihiko Fukui isn't resolved, Goldman Sachs Group Inc. said. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid=a4XOny5zafYM&refer=home

U.S.-EURO-AU-NZ DOLLARS

-Dollar's Clout Sinks Worldwide. Read more at-http://biz.yahoo.com/ap/080313/diving_dollar.html?.v=3&printer=1

-Dollars tough to sell on streets of Amsterdam. Read more at-

http://www.gata.org/node/6140

-U.A.E. to Keep Dollar Peg After U.S. Pressure, Official Says. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid=aG3fFPVb6w4Y&refer=home

-The Australian and New Zealand dollars rose after the Federal Reserve cut its benchmark interest rate for the sixth time since September, encouraging investors to buy higher-yielding assets. Read more at-http://www.bloomberg.com/apps/news?pid=20601110&sid=aAgyQn83O4Uo

U.S. RECESSION-DEBT PROBLEMS

-Poll: 71 percent think Iraq spending hurts economy. Read more at-http://www.cnn.com/2008/POLITICS/03/18/poll.iraq.economy/index.html

Story Highlights

Only 36 percent polled said the situation in Iraq was worth going to war over

Washington Post: Iraq war will wind up costing the U.S. government about $3 trillion

President Bush disputed notion that the war was negatively affecting the economy

-America's Money: In their own words. Everyday folks tell their stories about hard economic times. Read full story at-

http://money.cnn.com/galleries/2008/news/0803/gallery.real_stories/index.html

-Recession is here poll. 71% of economists questioned by The Wall Street Journal say the economy is contracting. Read more at-

http://money.cnn.com/2008/03/13/news/economy/recession/index.htm

-Three out of four say it's a recession survey. CNN poll of American adults sees growth in those with dim view of the economy. Read more at-

http://money.cnn.com/2008/03/17/news/economy/cnn_recession_poll/index.htm

-Social Security's running out of time. Because the trust fund is invested in Treasuries, the real problem starts not in 2040, but a decade or so from now. Read more at-

http://money.cnn.com/2008/03/18/news/economy/sloan_socialsecurity.fortune/index.htm?postversion=2008031904

REAL ESTATE

-Home Prices Plunge Across California Read more at-http://biz.yahoo.com/ap/080313/california_homes_prices.html?.v=3&printer=1

-Homebuilder sentiment still low. Expectations for new home sales remains near third-lowest level, according to report from the National Association of Home Builders. Read more at-

http://money.cnn.com/2008/03/17/news/economy/homebuilder_sentiment.ap/index.htm

-U.S. Economy: Housing Starts, Permits Decline as Slump Deepens. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid=a2YnE7Q6fhE0&refer=home

-How bad is the mortgage crisis going to get? What started in subprime is likely to continue cascading into the markets and keep the economy down until 2010, economist Paul Krugman forecasts. Bottom line for homeowners: An average drop of 25%. Read more at-http://money.cnn.com/2008/03/14/news/economy/krugman_subprime.fortune/index.htm

-CBS News reports from Florida. Read more at-http://thehousingbubbleblog.com/?p=4276

MORTGAGES-FORECLOSURES

-Canadian homebuyers rush to pay down mortgages. Read more at-http://www.globeinvestor.com/servlet/story/RTGAM.20080319.wcmhc0319/GIStory/

-Three Los Angeles-based mortgage lenders were shut down and seven people were arrested for running a ``predatory lending scheme,'' California Attorney General Jerry Brown said today. Read more at-http://www.bloomberg.com/apps/news?pid=20601110&sid=aXDbfX6UuV28

-More in foreclosure choose to walk away. Read full story at-http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2008/03/16/MNFFVI036.DTL&type=printable

-The Naples News reports from Florida. Read more at-http://thehousingbubbleblog.com/?p=4284

GEOPOLITICAL

-Ahmadinejad's Nuclear Mandate Reinforced by Election. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid=ayzIO0rDRzuE&refer=home

-'Death to Ahmadinejad,' Iranian crowds cry. Read full story at-http://www.breitbart.com/article.php?id=upiUPI-20080319-113404-3794&show_article=1

-Retaining his tough stance against Iran, Vice President Dick Cheney said Wednesday that Tehran may have restarted the nuclear weaponization program that a U.S. intelligence report said was halted in 2003. Read more at-

http://www.breitbart.com/article.php?id=D8VGJH980&show_article=1

-Five years later, Bush says Iraq war must go on. Read more at-http://www.cnn.com/2008/POLITICS/03/19/bush.iraq/index.html

Story Highlights

NEW: President Bush says victory in Iraq necessary to demonstrate U.S. resolve

Bush says removing Saddam Hussein from power was the right decision

Bush marks the fifth anniversary of the Iraq war with a speech at Pentagon

The president praises the so-called surge of U.S. troops in Iraq

-Bush defends Iraq record amid protests, five years on. Read more at-http://www.breitbart.com/article.php?id=080319134205.368w8zul&show_article=1

-Five years after launching the invasion of Iraq, President Bush strongly signaled Wednesday that he won't order troop withdrawals beyond those already planned because he refuses to "jeopardize the hard-fought gains" of the past year. Read more at-http://www.breitbart.com/article.php?id=D8VGJT8G1&show_article=1

-McCain: Don't Pull Troops From Iraq. Sen. John McCain, the Republican presidential nominee-in-waiting, said Tuesday that any hasty pullout from Iraq would be a mistake that would favor Iran and al-Qaida. McCain, who has linked his political future to U.S. success in Iraq, was in the wartorn country on Monday for meetings with Iraqi and U.S. diplomatic and military officials. Read more at-http://www.breitbart.com/print.php?id=D8VFSCIG0&show_article=1

-In the face of a possible escalation with Syria and Iran's efforts to obtain a nuclear weapon, parts of the country will shut down next month in what security officials say will be the largest emergency exercise in Israel's history. Read more at-http://www.jpost.com/servlet/Satellite?cid=1205420704459&pagename=JPost%2FJPArticle%2FPrinter

© 2008, Worldwide Precious Metals.
www.wwpmc.com

The GoldBugg Report - Gold Rebounds on Weak Dollar
Posted by Worldwide Precious Metals on Tuesday, March 25, 2008