Saudi Arabia Spends $3.5 Billion to Buy Gold in the Past Two Weeks

Gulf News
Gold demand rises in Saudi Arabia
By Mariam Al Hakeem, Correspondent
November 12, 2008, 23:42

Riyadh: There has been an unprecedented demand for gold in the Saudi market recently, with over 13 billion Saudi riyals (equivalent to US $3,466,667,946) (Dh12.75 billion) being spent on the yellow metal during the last two weeks.

Demand is expected to rise still higher as more investors turn to gold as a safe haven in the midst of the global financial crisis, according to market sources.

Sami Al Mohna, an expert on the gold market, said the trend had resulted in a substantial rise in the gold reserves of Saudi investors....

Hartford Insurance Becomes a Savings and Loan and Taps Uncle Sugar's CPP

There seems to be a bias to do whatever it takes to support big bonus and dividend paying financial companies, even one as diverse as GE, but to continue to let the manufacturing sector and blue collar jobs go to hell in a handbasket for the sake of global competitiveness and lower wages.

Yesterday the talking heads on Bloomberg and CNBC were ripping US manufacturing for its bad management practices, and blue collar workers for their extravagant wages, while praising the use of public money to generously subsidize the financial sector that caused this mess.

It was a truly Orwellian moment. What a collection of shameless, self-serving parasites!

Hartford's stock jumped 25% on the news, and helped to buoy the market. This did not last as the markets sold off heavily in the last half of hour trading. This Administration's economic policies are as bankrupt as they have left the Treasury.

The Hartford Announces Agreement To Acquire Federal Trust Bank
And Application To U.S. Treasury Capital Purchase Program
Friday November 14, 3:20 pm ET

HARTFORD, Conn. - The Hartford Financial Services Group, Inc. (NYSE: HIG) today announced that it has applied to the Office of Thrift Supervision (OTS) to become a savings and loan holding company and has applied to participate in the U.S. Treasury Department’s Capital Purchase Program (CPP).

In conjunction with these applications, The Hartford has signed a merger agreement to acquire the parent company of Federal Trust Bank for approximately $10 million and will also provide an additional amount to recapitalize the bank. Federal Trust Bank, a federally chartered, FDIC-insured savings bank is owned by Federal Trust Corporation, a unitary thrift holding company headquartered in Sanford, Fla. The completion of this acquisition will satisfy a key eligibility requirement for participation in CPP.

“We are taking these actions as a strong and well-capitalized financial institution looking for maximum flexibility and stability,” said Ramani Ayer, The Hartford’s chairman and chief executive officer. “Securing capital at the terms available through the Capital Purchase Program could be a prudent course in this market environment and would allow us to further supplement our existing capital resources.”

The Hartford’s purchase of Federal Trust Corporation is contingent on Treasury’s approval of The Hartford’s participation in the CPP, approval of the acquisition by the shareholders of Federal Trust Corporation, and the Office of Thrift Supervision’s approval of The Hartford’s application to become a savings and loan holding company. The Hartford estimates that it would be eligible for a capital purchase of between $1.1 billion and $3.4 billion under existing Treasury guidelines. The final amount of capital request will be determined following approval by Treasury.

About Federal Trust Corporation

Federal Trust Corporation is a unitary thrift holding company and is the parent company of Federal Trust Bank, a federally-chartered, FDIC-insured savings bank. Federal Trust Bank operates 11 full-service offices in Seminole, Orange, Volusia, Lake and Flagler Counties, Florida. The company's executive and administrative offices are located in Sanford, in Seminole County, Florida.

China Expected to Shift Reserves into Commodities and Gold

"Beijing's reserves could easily go up to 3,000 to 4,000 tonnes..."


The Standard - Hong Kong
Gold rush
By Benjamin Scent
Friday, November 14, 2008

The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields. (Is it odd that almost everyone in the world EXCEPT Americans can see this coming? - Jesse)

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.

Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

Until now, the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland's US$30 billion to US$40 billion in monthly capital inflows.

Government officials involved in the management of China's reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time - in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed.

"It's the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China Gold Association.

The International Monetary Fund has made reducing global payment imbalances one of its priorities in the aftermath of the financial tsunami.

"I think China probably will expand its strategic reserves into commodities during this downturn," said a Hong Kong-based strategist.

"China will continue to buy treasuries ... otherwise the system would get distorted," he said.

"But I think China will diversify its reserves."

"The Dollar Will Be Devalued By a Large Margin" - The Economic Times of India

"We must...have a genuine international currency as the international reserve currency... As a one-time measure, the dollar will be devalued by a large margin..."

Asia seems to be growing increasingly impatient with Ben Bernanke and His Merry Banksters.

The Economic Times
Be Bold Enough to Fight the System from Within
By Ramgopal Agarwala
14 Nov, 2008, 0126 hrs IST

The ongoing global financial tsunami that originated in the US poses a serious threat to the stability of world economy. Already the financial crisis has spread from the US to Europe, Japan and major emerging economies.

The loss of wealth due to decline in share prices alone is in scores of trillions of dollars. Similar trillions are being lost in wealth in real estate. The crisis has spread from the Wall Street to the Main Street with a serious recession in the US which is sure to have a contagion effect across the globe.

Even worse is the scenario of the future of the US dollar. The US is pumping more and more dollars into the world economy, seriously aggravating the burden of its external debt, which is already over $20 trillion. If the confidence in the US dollar is shaken and the dollar goes into a free fall, we may well have what has been called ‘mother of all monetary crises.’

Faced with appreciation of their currencies in relation to dollar and fall in exports, major economies may well embark on competitive devaluations and protectionism, leading to a downward cobweb of production and employment in the world. The Great Depression of the 1930s may well repeat. We must not let that happen. We must make dispassionate analysis of the causes of the crisis and devise corrective measures however bitter they may seem.

While analysing the current US financial crisis, it has become conventional wisdom to blame the ‘greed’ of financial players on the Wall Street. But what else do we expect from the financial players? Profit maximisation is their job, their religion, if you like. It is the job of the regulators to make them work within the rules, which prevent greed turning into macro-economic imprudence. The real failure of the US system lies in its lax regulations that originated from a failed doctrine of self-regulating markets.

Along with the lax regulations, the spending spree in the US was fully supported, nay, encouraged by the authorities in order to prevent recession in the economy, in the wake of dotcom crisis and 9/11. Federal funds rate was brought down from 6.24% in 2000 to 1.35% in 2004 and remained below the 2000 level in 2007. Federal budget balance was changed from a surplus of $236 billion in 2000 to a deficit of $413 billion in 2004 and these may exceed $1 trillion in 2008/9.

In a normal economy, such domestic excesses will be prevented by the need to balance the external account. Unfortunately, the world has been on a US dollar reserve system, and there was no international regulatory mechanism to enforce discipline on the US spending. The world was flooded in the red ink flowing from international deficit financing by the US. Between 2000 and the third quarter of 2007, the US ran a current account deficit of $4.6 trillion!

But now the world must act. There could be a three-pronged strategy.

First, the countries holding US dollars must come forward to recapitalise the financial system of the US (in the US and abroad) by buying up equities of the US companies at the current low—and attractive—prices. In other words, rescue of the US financial system will have to come from the use of dollars in the system that created the problem in the first place rather than pumping more dollars into the system. What the sage of Omaha, Warren Buffet, is doing in billions needs to be done in trillions. Like Buffet, the lenders have to drive a hard bargain and these investments could be prudent over the long term as Warren Buffet’s probably are.

Second, we must go back to the wisdom of Keynes and have a genuine international currency as the international reserve currency. An internationally accepted bancor (as Keynes called it) should be created and exchanged for unwanted dollars. This programme will have a provision for systematic redemption of US dollars over time along with structural adjustment in the US economy. (Who will manage the rate of increase in the world currency, the 'bancor?' - Jesse)

As a one-time measure, the dollar will be devalued by a large margin to help US reduce its net imports and relative stability in real exchange rates will be maintained among major currencies through a system of managed floats. Speculative movements of short-term flows will be discouraged through regulations and taxes. In general, we may have to revive some features of exchange rate management in Bretton Woods agreement.

Third, a coordinated effort will be made to create alternative sources of demand in the world economy as the US net imports decline inevitably. Net additions of bancors needed (which could be more than a hundred billion dollar equivalent) could be used to fund global public goods.

The upcoming G20 summit in Washington DC could be a venue for considering these matters. Unfortunately, as indicated by the White House press release, the US seems to be putting the summit in the framework only of “reform of the regulatory and institutional regimes for the world’s financial sectors” and “strengthen(ing) the underpinnings of capitalism” by discussing how the summit leaders can “enhance their commitment to open competitive economies, as well as trade and investment liberalisation”!

Given the US veto power in Bretton Woods institutions, it can prevent the much-needed restructuring of global financial infrastructure. In that case, Asia should proceed with its own ‘Bretton Woods’ conference to set up a regional financial architecture that will pool its excess foreign exchange reserves in a regional sovereign wealth fund, create its own Asian currency unit as a parallel currency and use the seigniorage provided by the regional currency to fund the urgently needed physical and social infrastructure as well as measures to fight climate change.

This is an ambitious programme, but with a global economic calamity looming large, nothing less will do.

The author is with RIS, Delhi