OUR ECONOMY and GOLD IN 2 CHARTS

 

THIS CHART SHOWS A PROPORTIONAL REPRESENTATION OF THE FINANCIAL SECTORS OF THE ECONOMY

This chart puts some dollar values on the various financial sectors.

There is no collateral for almost all the Credit based Derivatives that make up the vast dollar amounts involved in our Financial Economy.  (2-4 Quadrillion dollars in derivatives alon)

The entire multi Quadrillion dollar derivatives sector of our economy is comprised of UNSECURED DEBT where the counterparty risk is spread across all sectors of the economy,

However, much of financialized sectors below that also includes unsescured debt like ETFs, REITS, Tracking stocks, etc that purport to own commodities or stocks or real estate  but only own derivatvies that represent this ownership through leveraged derivate instruments.  And then there is the universe of strucutured products that supposedly base their performance of undrlying stocks or commodities but again are comprised of derivatives.

Then, even with Government Bonds, these are IOU's that will not default because we can print money to pay them off, but they are backed by nothing but "Good Faith."  

In fact, the entire pyramid above the tiny gold triangle at the bottom can be said to represent a global economy that no longer has any capitalist component (investment in capital through savings) - it is rather a Creditocracy - or Creditism - where economic growth is gained through credit creation that enables consumption.

But this is a highly inflationary system by nature.  And it is form of a Ponzi Scheme dependent on the unlimited growth of credit to unable the unlimited growth of discretionary spending.

The trouble comes in turbulent times - when inflation gets out of hand, and spending becomes more and more punitive and then every wants to cash in, and when they do they find out their claims are worthless because the tiny bits of collateral underlying all the derivativres have been sold again and again to vast numbers of other claimants (Rehypothecation) and you own nothing but worthless derivatives based on nothing of real underlying value.

Every government understands this. I'm  not saying anything new or inspired.

That's why all governements are furiously buying gold.  (Except the USA where we're clinging to strength of the printed dollar.)

And if you're at the very top of the US CREDITOCRACY this is still a good deal for you.  There are plenty of suckers willing to by your worthless derivative crap and make you richer and richer and richer while everyone around you goes broke.  (Yes, you, Blackstone, and Carlyle and KKR etc - Good job!)

But if you want protections against this and you don't work for one of the firms above you need to go right to the bottom of the pyramid and buy the only asset that has no counterparty risk and no rehypothication risk and no collateralization risk: GOLD.