Wednesday, December 03, 2008

Citigroup memo suggests buying gold

One of the UKs largest papers, The Daily Telegraph, is reporting on an astonishing internal Citigroup memo. For regulars here, you won't be surprised to find me subscribing to the premise of the memo:

Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup. (By Ambrose Evans-Pritchard)

After all, I'm a believer that American monetary policy is worse than a mess. And as scary as it is, this Citigroup memo suggests there are only two possible results of the current bailouts (which are happening around the global):

The bank said the damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

Of course, Citigroup is far from being able to tell the future. But assuming such a memo exists (and I think The Telegraph is reputable), it does indicate that even The Billionaire Bankers are starting to acknowledge that these bailouts are doing little, but masking the problem of an economy that exists more as a house of cards than a factory of brick & mortar.

Regardless, the memo reinforces my fear that the Bush Bailout was a roll of the dice... a gamble... a gamble on the US Dollar that could (though still unlikely) lead to the collapse of the dollar.

I suggest reading the entire article. There are quite few interesting pieces in there.

Tim White

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