WHY Gold? Well...85 Billion Bailout, AIG, LEH, BSC, Gold, AUY, KGC, ABX, GG

When your Guaranteed Interest Certificates (GIC's) and Savings Account dip below inflation level, what does it mean? Basically, it makes no sense for the public to be saving money. When $100 saved until the next year cannot even overcome inflation and it buys less food/commodities, there is something wrong with the system.

What do you do?

Many people will disregard GIC's and opt for supposedly secure Money Market Mutual Funds. Sorry to inform you, but apparently they're not as safe as you think...either! To top it off it's not FDIC insured up to $100,000 like most Bank Savings Accounts and GIC's are!

Money-market fund dips below safety benchmark

BOSTON (AP) -- The assets of a money-market fund that held $62 billion three months ago have fallen below a safety benchmark intended to ensure investors who put money in can get it all back -- just the second unsettling instance in which a fund has exposed investors to potential losses in the nearly four-decade history of money-market funds.

Reserve Management Co.'s announcement that its Reserve Primary Fund had "broken the buck" after its assets fell sharply because of soured investments in Lehman Brothers Holdings Inc. marked the first such investor exposure to money-market losses since 1994.

Once again I ask, what do you do? When what has been secure and the safety net of the public, bank notes, GIC's, saving accounts, even Treasury notes from the government have little meaning... where do people turn?

GOLD.

Today the US Government added another $85 billion loan to the table for American International Group's (AIG) federally backed bailout - the largest in history. At an interest rate of 11%, people must be asking themselves what they're doing with 2% overnight banking rate and not much more on their savings accounts.

On that note, Gold and Gold producing companies soared up.

KGC Kinross, AUY Yamana, GG GoldCorp, all went up 6-8% while gold went up $52/ounce at one point breaking past $800/ounce from a paltry $740/ounce grim low of last week.

Looking at the graph to the left it's almost as if people woke up and realized the financial system is in chaos and there are still more skeletons to come out of the closet.

With more Federal funding pending for troubled firms - the story now becomes... when does the age of privatization and capitalism end for the US dream?

McCain told ABC's "Good Morning America" on Wednesday that he didn't want to bail out Asmerican International Group Inc., the nation's largest corporate insurer. Yet he said millions of people whose finances were tied up in the company were in danger of having their lives destroyed.

Before the bailout was announced, McCain had said flatly that he would not support a bailout of AIG or any other company.

No support? The Feds are trying to conserve their lifeline, there is only so much left in the barrel of the gun! Keeping the overnight rate at 2% yesterday instead of cutting it further... at least this leaves 8 more possible 0.25% cuts in storage for the Feds, should things turn worse!

Across the border in Canada, Finance Minister says Canadian Banks are well capitalized and Tier 1 ratio remains solid. While that may be a fair statement, oil gas retreating back to $90/barrel will be interesting implications for the surplus that provinces like Alberta has been running at.

OTTAWA, Sept 16 (Reuters) - Canadian banks do not have the same capital problems that some U.S. and European institutions have run into, Finance Minister Jim Flaherty said on Tuesday.

"Since August 2007, OSFI (the Office of the Superintendent of Financial Institutions), the Bank of Canada, the Department of Finance and me as minister of finance have been in unusually close communication with the financial institutions, and obviously the large banks in particular," Flaherty told Reuters.

"There have been concerns from time to time, but where we are now is that our banks are well-capitalized. OSFI is comfortable, the Bank of Canada is comfortable, and I'm comfortable with their capitalization. This is different from the situation with some of the U.S. investment banks and some of the banks that have run into difficulty in Europe as well." (Reporting by Louise Egan; Writing by Randall Palmer; editing by Rob Wilson)

Bottomline, gold is key. We have emphasized bullion and quality gold stocks when it was $740 last week, and continue to say so, fiat currency is spinning out of control with these injection of newly created funds. It's only a matter of time before the dollar devalues further against other currencies in the world.

Some of our favorites are holding up well in this storm and can only get better.

Minera Andes (MAI.to) - up 10% at one point today, bargain under $1 - made $9 million last quarter - Rob McEwan of Gold Corp owns 30%+ of shares
TNR Gold Corp (TNR.v) tiny market cap and 25% on MAI's Copper project - major ties BHP, Canaccord, PI Financial and brokerage houses - will be interesting as story gets out
Mantle Resources (MTS.v) - waiting for Zinc prices to get noticed again - Lundin owns 10%
Serengeti Resources (SIR.v) - ridiculously good drill results and no market appreciation! 0.5% Copper over 480+ metres. (yes metres) - need better market intelligence and marketing!