And you won't pick up the paper and find that a crook like Bernard Madoff has stolen away the value of your gold coins. The latest Wall Street desperado took investors for some $50 billion. And now the FBI, SEC and all the gumshoes and hacks are making a big deal of it.

Of course, in purely financial terms it is a big deal. The press has labeled it a "ponzi scheme." But Charles Ponzi took in only $10 million. Peanuts compared Madoff's scheme.

Another important difference. Ponzi took money from ordinary investors, widows and orphans. But Madoff went for bigger game - hedge funds, banks, and professionals. Today's news tells us that the world's largest bank - HSBC - was a victim. Banks in Geneva said they were out $4 billion. The Fairfield Greenwich Group said it had invested $7.5 billion with Madoff.

Of course, we don't like to see widows and orphans lose get scammed. But hedge funds? Banks? Who can honestly say that they don't enjoy seeing these mighty moneymen tripping over their own greedy delusions? Here at The Daily Reckoning...the news of Wall Street's losses cheers us up...like reading the obituaries and finding no mention of our own name.

But when you own a gold coin you won't have to wonder if the balance sheet is made up...or if the trades were fictitious...or why the SEC was asleep at the switch. A gold coin is what it is...no more, no less.

When the ground gives way...gold coins stay right where they were - or go up in value.

Not that we're urging you to buy gold coins. We did that for the last eight years. Now, you're on your own.

Bill Bonner
for The Daily Reckoning Australia

• Rare Coins as an Informal Way of Estate Planning
• A Funny Story About $20 Gold Coins
• Chartwell Enterprises – Pyramid or Ponzi?
• Bernie Madoff is a Giant in His Field
• The Baddest Bank in the West

All the hot money being pumped out by central banks is finally starting to de-thaw the inter-bank lending market. You probably now know more about the inter-bank lending market than you ever expected or wanted to know. But the decline in the rate banks charge each other to borrow overnight (LIBOR) really just means that banks have slightly more trust in each other this week than they did last week.

Yet on Wall Street, the Dow fell 514 points overnight. It was a 5.7% one-day fall. The S&P 500 is down 39% year-to-date and 43% from its high last October. You'd think the global warming in the credit market would be a good thing.

But investors have other worries on their mind now. Earnings, for one. In the bigger picture, they are wondering just how big this global recession is going to be. How many more layoffs will there be? How bad will it get? Judging by stock prices, pretty bad, and maybe worse.

Oil fell to under $67. Gold's at $735. Copper and aluminium fell, as did the Reuters/Jeffries CRB Index of commodities. If you look at the action in this market, investors are pricing in a shocking 2009, not just a run-of-the-mill recession.

Apparently there's a small silver lining in all of this. A recession means the Reserve Bank of Australia can ignore yesterday's inflation numbers and cut interest rates again on November 4th. The Australian Bureau of Statistics reported yesterday that inflation ran at 1.2% in the most recent quarter and 5% for the year.

If inflation keeps rising and the Reserve Bank keeps cutting rates, there won't be any need to guarantee bank deposits in Australia at all. Bank interest won't even keep up with the inflation rate. Cash will be a wasting asset. And if shares are still falling and property can't recover...ummmm.

Maybe the RBA won't ease after all. Maybe the concern that future growth could slow will be trumped by actual real signs of inflation in the economy now. Or maybe not. "This won't stop the RBA from easing," Mac Bank interest rate strategist Rory Robertson.

"History shows that recessions solve inflation problems, so much of the world is about to have their inflation problems solved, and pretty rapidly," he told a reporter. History also shows you can have rising prices AND a recession. That's the good old stagflation of the 1970s. And in any case, we wouldn't say that a recession "solves" the problem of inflation.

But maybe we're overly worried about inflation. After all, most central banks target or tolerate annual official inflation of 2% and call it "price stability." And Jeremy Grantham, who's been bearish on stocks since at least 2003, seems to think that value will be destroyed in financial asset markets faster than new lending and credit can reflate it into a new bubble.

"Don't worry at all about inflation," wrote Grantham in a note to investors. "We can all save up our worries there for a couple of years from now and then really worry! Commodities may have big rallies, but the fundamentals of the next 18 months should wear them down to new two-year lows."

Ouch. A year or two of lower lows on stock markets until inflation rips through the economy? That sounds...depressing.

But Grantham is dipping his toe into equity waters. "At under 1000 on the S&P 500, U.S. stocks are very reasonable buys for brave value managers willing to be early. The same applies to EAFE and emerging equities at October 10th prices, but even more so. History warns, though, that new lows are more likely than not."

The S&P 500 made its bear market low in October of 2002 at 776. That's 13.3% below yesterday's close of 896. And should it decline to that level, it would be exactly 50% below its all time intra-day high of 1,552 (set on October 31st of last year).

By any historical standard, that's a whopper of a bear market. So Grantham dipping a toe in now is an assumption that this bear market is roughly consistent with similar bear markets of the last 137 years. Take a look below and you'll see what we mean.

Five Worst Bear Markets on the S&P 500 Since 1871

The bear market of 2008 already ranks up there among the all time greats. The only question now is whether the bear market in stocks triggers a bigger recession in the economy that leads to an even greater fall in stocks in the coming years. So is it 1929 or 1974?

There aren't long bread lines...yet. And from Australia to America, the government is searching for ways to keep existing mortgage owners in their homes while brining new buyers back into the market. But it's all happening in the slow-motion depression way Bill Bonner and Addison Wiggin wrote about in Financial Reckoning Day back in 2003.

We've also been getting a lot of reader mail about how to buy physical gold. Good question. We'd say check the Perth Mint, but got this note recently from a reader:

I was in Perth the other day with a bit of time, and a grand burning a hole in my pocket so I headed down to the mint. I usually get the beautiful minted gold bars, just like a normal gold bar but set in a nicer Perth mint cast. None available. Any normal gold bars...none available. Oh, any 1oz Nuggets or Kangaroos? None available. Maple Leafs or Kruggers? None available. Anything at all in 1oz lots? Yep, a 1oz "lunar" gold coin celebrating the Chinese Year of the Rat! (produced by the Perth Mint)....that'll do! Thank You

We contacted the Australia Bullion Company here in Melbourne this morning-only to find out all the jewellery stock has been melted down, the bullion sold off, and the business restructured! So retail investors can't get bullion that way.

You might try Chris Mealin. He's the managing director at Downies Australia Coin Auctions. Downies has a retail store in the arcade at 98-100 Elizabeth Street in Melbourne. You won't find much bullion, Chris said when we spoke to him this morning. And the collectable gold coins Downies sells will typically sell at a 10-15% premium to the spot price. But if you're interested, you can reach them at (03) 8677 8800.

Dan Denning
for

• All the World’s Stock Exchanges are Now Officially in Bear Markets
• The Price of Gold is Low – But It Won’t Stay There Forever!
• We Are All Turkeys, Waiting for the Axe
• Prices of Gold in the Top 10 World Currencies
• Stock Markets All Over the World are Getting Whacked

"Hey...what's this?" Henry wanted to know.

"It's a gold coin... A Canadian maple leaf..."

"Oh...is it worth anything? It says it's worth $20...kind of a measly birthday present, wouldn't you say, Dad?"

"Well, it's worth a lot more than that. It's gold. An ounce of gold..."

"What's that worth? Two hundred dollars?"

"A lot more than that..."

"But it says it's worth $20. I guess at one time it was worth $20..."

"Yep."

"Can you still use these for money? I mean, can you go into a shop in Canada and pay for things?"

"Well, maybe, but I don't think it would be a good idea..."

"Or maybe you can say to your boss that you want to be paid in these coins? And then, when the IRS asks you how much you made, you can say $20?"

"I don't know Henry, but I think that's the sort of thing that people go to jail for."

"Well, it's their fault the coin is worth more than $20, isn't it? You should be able to use it as $20. I mean, what's going on, anyway? Something funny about this..."

"Oh Henry...this is a very long story...but you're right. It's very funny."

Bill Bonner
for The Daily Reckoning Australia

• Rare Coins as an Informal Way of Estate Planning
• Gold Coins for $870-$890 An Ounce
• Funny Business at the Banks
• The Price of Gold is Low – But It Won’t Stay There Forever!
• A Gold Standard, Without Gold

"I remember my grandmother telling me about her sentiments as she was faced with the decision of whether or not to turn in the family gold coins," Byron King tells us.

"Back in 1933, my grandmother was a young widow raising four children during the depths of the Great Depression. She taught school in Pittsburgh and supplemented her living with private tutoring. She had some of her savings in a local bank, and some of the rest in gold coins that she had accumulated over time. Her 'gold' savings added up to about $2,000 - about 50 gold $20 pieces, and various other gold coins of lower denomination - which was a lot of money back then. If something had happened to my grandmother, the gold was all that would keep the children out of some orphanage.

"Within a few days of FDR being inaugurated in March 1933, he issued a Executive Order requiring that all citizens and others subject to the jurisdiction of the United States turn in and redeem their gold coins in exchange for an equivalent value of U.S. currency.

"So my grandmother went to the bank and asked the bank manager what he thought she should do. He became very serious, and pulled out a piece of paper. He started reading to my grandmother the possible penalties that she could suffer if she failed to turn in her gold coins. The penalties included prosecution, fines and even imprisonment. So my grandmother - suitably intimidated - took the gold coins out of hiding, and turned them into the bank. The U.S. government eventually melted down the coins, into what are called 'gold melt' bars. The paper currency immediately began its long period of depreciation due to inflation."

Bill Bonner
The Daily Reckoning Australia

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