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Finance

Cynic’s corner

Is it old age that makes us more cynical, or is it the world we live in? Each week we will present a cynic’s view of a subject that’s bugging us. This is your platform for voicing your opinion, so send your diatribe to rebasse@aol.com for inclusion in this section. I’ll kick off with my favourite subject: Gold’s relationship with global currencies.

Global Money supply

Is it real or is it illusary: is it backed by Gold or Toxic Derivatives? Below we look at the notional value of the Global Money Supply and it looks to us like the entire financial system is now a Troubled Asset.

The first picture illustrates the total global supply of Real Money; that is money that actually exists. The total is equivalent to US$4.03 Trillion. This is also known as Power Currency, that is currency that is issued by Central Banks, supported by the country’s reserves, which were historically made up of Gold, but may be composed of those “troubled assets” that we hear so much of.

Now most of you will have heard of Pyramid Schemes and Ponzi Schemes – here we have the biggest of all that puts Mr Madoff to shame. The countries borrow money by issuing bonds that pay a fixed dividend, and the people accept them as super-safe “Money”, but just like the note, it’s just a government promise or an IOU for $65Trillion. Then we have a Bond and Stock Market currently valued at $100Trillion, which as we know is priced on emotion and can become worth much less overnight. Above that we have Miscellaneous Assets such as real estate and commodities worth a notional $125T, but again, only worth what someone is willing to pay for it. If the market collapses, so does this value. At the top of this pyramid we have the infamous DERIVATIVES. Things that don’t exist that were paid for with money that did not exist, but are valued by their owners at $1,600 Trillion, which happens to be only 400 times the real money that exists.

Points to think about:

• If the people who negotiated those derivatives got just 1% commission, they would receive $16Trillion. •There is not enough money in the world to pay this commission! If we want to get the notional value of the world’s 150,000 Ton Gold reserves we must divide the total notional value of the assets ($1894Trillion) by the current value of the Gold (US$4Trillion) and we conclude that Gold must increase by 473 times its current value to support this financial asset bubble price. Gold should be US$449,350 an Ounce.

ABOVE: The total money supply that countries have issued and that is either in banks or currently in circulation. BELOW: Real money and digital money: see how fractional reserve banking and leverage through margin can create money out of thin air!

The Great Credit Contraction

“The system does not collapse but evaporate.” race Mayer, J.D.

DERIVATIVES:

Shadow derivatives

$1,600T

$800T Reported derivatives $683T Unfunded Gov’t Liabilities $250T

MISCELLANEOUS ASSETS:

$1.25T

Private Business $1.0T Commercial Real Estate $30T Residential Real Estate $80T non-Monetary Commodities $4T

SECURITIZED DEBT/STOCKS: $100T Corporate and Muni Bonds $25T World listed stocks $51T U.S. listed stocks 15T

BROAD CURRENCY ILLUSIONS: $65T

World treasury bills/Govt’ Bonds $15.5T U.S. Debt/Treasury bills $11T

POWER CURRENCY ILLUSIONS: $4T

Physical notes (£,€,$,¥,C$,A$,etc.) $2T FRN$ (physical paper notes) $800B

POWER MONEY (In Tons):

Gold & Silver

150,000T

$2-4T