Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Prices - You Can't Outrun the Long Arm of Equilibrium

Commodities / Gold and Silver 2014 Jan 03, 2014 - 11:35 AM GMT

By: Dr_Jeff_Lewis

Commodities

Currently, commodity price performance has lulled the speculative (and therefore, the mainstream) community into a sense of complacency. The speed with which accidents can happen and induce overall change in sentiment is something which can only be imagined in the context of the flash crashes. Outside of more circuit breakers, the HFT conditions that ultimately led to the May 2010 fat finger flash crash and its reverberating damage have not been resolved.


Perhaps the greatest errors made by modern and mainstream economists are the discounting of debt and the growth of the financial sector. Because debt is considered an asset and a liability, it is cancelled out of the monetary equation.

Servicing debt puts a drag on capital formation and allocation. Real growth and innovation slows, making debt service even more difficult.  A debtor can default for a variety of reasons, but when the debt itself is used as collateral for more tiers of debt the risk of collapse multiplies.

Modern economic models do not account for the risk or the drag associated with debt. And this, of course, becomes the fuel for the little spark that will no doubt ignite a fire for which we are collectively unprepared.

Exogenous versus Endogenous

Furthermore, economic academia considers financial market risk an outside concern and not central to the issue.  This is another incredibly naïve assumption in risk modeling. It is perhaps the crowning example of the inefficiencies and utter detachment from the reality that exists at this level of academia.

That we are building so-called models of economies that have been entirely created and shaped by this invisible very central force (the financial industry) is almost too absurd to believe.

Financial System as Proportion of the Total Market

Interest rate, equity, FOREX, and energy futures have dominated in the aftermath of Bretton Woods.

Derivatives trading – mostly futures contracts on interest rates, foreign currencies, Treasury bonds, etc. - had reached a level of $1,200 trillion, $1.2 quadrillion, a year. By comparison, U.S. GDP in 2006 was $12.456 trillion.

For perspective, at $37 trillion, the U.S. Bond market is about 2.6 times the size of the $14 trillion U.S. Stock Market.

Precious metals as a percentage of overall futures is tiny - yet they won't go away.
The metals still exert the all important barometer. Even though the mainstream loves to hate them, they still love to hate them for a good reason; otherwise they would be forgotten.

World markets are now tuned to this part of the information highway - a dark vacuum, absent any sign of human life. 

What does $1 trillion per year look like without a black swan event -anything - or even a series of smaller unplanned-for phenomenon?

How long can the repo machine keep going without good collateral?

It is impossible to precisely diagnose the event or chain of events, but we can sober to probabilities. And we can be certain that all natural systems abide by equilibrium - always returning back to them eventually.

For more articles like this, and/or for a breath of fresh silver market reality amidst the stench of denial and technically meaningless short term price obsessed madness, check out http://www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2014 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in