The Reserve Bank of Australia cut rates by the largest amount since 1992

The Reserve Bank cut interest rates by 100 basis points today, in a bid to shield the Australian economy from the global wreckage.The bigger-than-expected reduction in official rates to 6.00 per cent was the largest cut in rates by the Reserve Bank since May 1992. The stock market, which had been battered earlier by a rout on northern hemisphere bourses overnight, rallied into positive territory after the shock move. Reserve Bank governor Glenn Stevens said conditions in international financial markets took a “significant turn for the worse” last month.

“Economic activity in the major countries is also weakening, and evidence is accumulating of a significant moderation in growth in Australia’s trading partners in Asia,” Mr Stevens said in a statement.

Bernanke indicates FED may be ready to cut rates

Federal Reserve Chairman Ben Bernanke on Tuesday signaled a readiness to lower U.S. interest rates in a dramatic shift to support an economy battered by a financial crisis of "historic dimension."

"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," Bernanke said.

In opening the door to rate cuts, Bernanke is departing from the view he and other Fed officials had expressed until recently that lower rates would likely have little effect in boosting economic activity while credit markets are frozen.

My comment: Wasn’t it just a a couple of months ago that we were facing inflation and now everyone is panicking and cutting rates and starting in on what I think will be a global coordinated reflation attempt. Steve Saville says that the FED isn’t even waiting to cut rates that the reflation has begun.

In our 3rd October email alert we wrote: "The Fed expanded its balance sheet by $254B during the one-week period ending 1st October, which follows a $204B expansion during the preceding week. As a result, the Fed’s balance sheet has grown by almost 50% within the space of just two weeks.

This, we believe, is unprecedented."Last week’s money creation by the Fed won’t appear in broader money-supply data until the end of this week, but the week-before-last’s expansion of the Fed’s balance sheet has given the True Money Supply (TMS), our preferred monetary aggregate, a substantial boost. In fact, it has pushed the year-over-year (YOY) TMS growth rate from 3.75% to 7.0%, thus signaling a new major upward trend. The situation is depicted below

I am not a conspiracy nut but this is interesting.

Unprecedented demand for precious metals and volatile markets forced the U.S. Mint to cease production for the half-ounce and quarter-ounce popular American Eagle gold coins for the rest of this year and to supply other bullion coins on an allocation basis.

"Due to the extreme fluctuating market conditions for 2008,
as well as current market conditions, gold and silver demand is
unprecedented and the demand for platinum is unusually high,"
the U.S. Mint said Monday in a memorandum to its authorized
coin dealers. "The U.S. Mint has worked diligently to attempt to meet
demand, however, blank supplies are very limited and it is
necessary for the U.S. Mint to focus remaining bullion
production primarily on American Eagle Gold one-ounce and
Silver one-ounce coins," the Mint said.

My comment: Is it possible that the government wants to make it as difficult as possible to put the newly created dollars into a store of value. Nah the government is good and always wants to help people. I do know the FED can create money but it cannot really control where it goes. I suspect gold will be a significant receipient of this new money.

John Polomny
The Real Deal