Sunday, February 17, 2008

Central Banker to Buy Assets? What does that mean?

What does that mean? Well, the Fed and other central banks have been trying to loan out a mountain of money to prevent a deflationary depression. But the commercial and investment banks aren't lending out what they are borrowing from the FED, because a lot of the assets that they own- subprime based CDO's- are losing value, and the bank's reserves have to be constantly replenished with borrowed money.

But the lower interest rates and unlimited liquidity might not be enough. The central banks could lower the interest rate to zero, and if no one wanted or was able to borrow more, the house of cards will fall. So it looks like the central banks might actually buy companies that they consider too important to let fail, and just print money to do it. This is called monitizing the debt, and it is wildly inflationary.

Right now all of my 401(k) is in cash, and that is the best I can do to avoid a falling stock market, but I wish I could put some or all of it into a very respected exchange traded fund (ETF) that actually holds more gold than many countries. GLD is the by symbol, and each share is about 1/10 oz of gold that they buy. It is held in Zurich. Sadly my hands are tied.

Here are some articles that talk about possible montization by Central Banks. The last article explains this in good detail.

United Kingdom Seeks Power to buy Companies- Marketwatch .com

U.K. government to nationalize Northern Rock

Depression risk might force U.S. to buy assets

Central Banks Other Option, Crossing the Rubicon

I have to appologize for these last few posts. They have been pretty depressing, and I really wanted to do some on gardening - soils, cool and warm weather gardens, patio gardens etc. Maybe tomorrow. I talked to Gary L., at L... Lumber and he is getting me a price on some patio door windows to use as solar collector glass..... so, more on that later as well. I want to do two solar hot water, and two solar hot air this year.

1 comment:

AnnieOfBlueGables said...

The gardening and solar projects actually hold more of my attention.
love you, sweetie

~a