Meanwhile, anxious Northern Rock customers, who waited through the night to take out their savings this morning, were branded "irrational" by the chairman of the Financial Services Authority. This is London
Why, you might be wondering, would the Chairman of the FSA brand those queueing to withdraw their savings from Northern Rock, "irrational?" Surely it isn't irrational to worry about one's deposits in a bank with a very imbalanced balance sheet?
Perhaps the people queueing to withdraw their deposits didn't get the memo.
"What memo?" you ask.
The memo which said that all deposits in the anglo world's financial system would be made good, guaranteed by the government, as is being done to the remaining deposits at Northern Rock. As the deposits at Northern Rock, and likely those at any other financial institution caught in this mess, are to be made whole, in more fiat money, of course, the queuers deserves to be branded irrational. Right?
Not so fast. While in small doses, such actions will not have a large effect, en masse, a policy of this sort will lead to significant currency debasement. In that case, at current rates of interest, getting one's deposits out of the system and into the precious metals seems quite rational indeed.
Gordon Brown might be pleased to have dodged this bullet, but I wonder how he feels about selling off Britain's gold, under $300 per oz. Who knows, Gordon, that stuff might come in handy some time soon.