2022-10-29
The Politicians and Bankers and their ilk have been dining at our expense for decades. Just how that system has become as invisible (to the average Joe) and exponentially more dangerously (and likewise invisibly) close to implosion can be traced to its ever-increasing complexity.
Why is it a problem? Because those that run it have lost their sense of responsibility (or failed to nurture it). There was always another wheeze which could be invented to tide it over (whilst making bags of money before the implosion arrived), the problem being that such schemes invariably morphed into Ponzi schemes (even if not originally devised as such).
Egon von Greyerz (of Matterhorn Asset Management) brings us up to date.
"No banker, no company management or business owner ever has to take the loss personally if he makes a mistake"
How does that compare to you or I?
"Today the financial system has developed derivatives to become such a sophisticated instrument that virtually no financial transaction can take place without involving some form of derivatives"
How many of us mere mortals own a derivative?
" ... senior management, including boards of directors, haven’t got a clue of the massive risk derivatives represent"
which is why we steer clear of them:
(a) because we don't understand them
(b) because it's very unwise to invest in schemes we don't understand.
"These derivatives which some of us now estimate to be over $2 quadrillion (not $600b reported by BIS) are what will bring the financial system down"
If the BIS, the Central Bank of the Central Banks, doesn't know how big the derivatives problem is, then what does that say about the system?
There is much more, and all explained very simply, and as you would expect he is a fan of gold as money - but he is in that business so has an axe to grind. Still, I find him very persuasive.
Even if he has some issues wrong (and who doesn't?) the downside risk to gold ownership may be more manageable than that of many another asset.
