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Why will more and more wealth chase gold as a safe haven?

*Bloomberg, by Henry Meyer & Ayesha Daya, January 20, 2009

“Roubini Predicts U.S. Losses May Reach $3.6 Trillion

U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is ‘effectively insolvent,’ said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

‘I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,’ Roubini said at a conference in Dubai today. ‘If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.’

Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.

President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration, Roubini told Bloomberg News. Congress last year approved a $700 billion rescue fund, of which half remains to be disbursed.

Bank of America Corp., the largest U.S. bank by assets, posted a quarterly loss of $1.79 billion last week, its first since 1991, and received $138 billion in emergency government funds. Citigroup Inc. posted an $8.29 billion fourth-quarter loss, completing its worst year, and plans to split in two under Chief Executive Officer Vikram Pandit’s plan to rebuild a capital base eroded by the credit crisis.

‘Bankrupt’ System

‘The problems of Citi, Bank of America and others suggest the system is bankrupt,’ Roubini said. ‘In Europe, it’s the same thing.'”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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