Derivatives Are Competing With Gold!
Shelby Moore
We must understand how important derivates are. They are the most
important manipulation of the system.
The reason there has been such a big increase in derivatives, starting around 1980, is that higher potential gains in derivatives have
been used since 1980 to depress the investment desire for Gold:
www.hinduonnet.com/thehindu/biz/2003/07/07/stories/2003070700100200.htm
"...One can say that financial derivatives took off in a big way
post 1980. And, what is special about 1980? That year probably marked a
turning point in the market's perception and understanding of interest
rate risks..."
The Central Banks realized they have a runaway problem in 1980, with Gold
going to $850 and Silver to $50, so they decided to whiplash the interest
rates and create derivates on top of the non-free market volatility they
created:
http://kudlowsmoneypolitics.blogspot.com/2006/11/still-strong.html
"...Bill Gross (shelby: ideaLab VC?)...The derivatives market is
growing at 20-30 percent a year and is now approaching 5x assets ($450
trillion derivatives market vs. a roughly $100 trillion economy). Seeing
as how FNM can't even produce a financial statement, there may be some fur developing at the edges..."
"Price volatility is key to derivatives growth
The key to any kind of derivative contract - be it on real assets such as
commodities or on financial assets - is uncertainty about the price
behaviour of the underlying asset..."
Thus rising volatility is a signal that the Central Banks are increasing
liquidity and want to give the market excess incentive to route this
liquidity into derivatives, instead of Gold & Silver.
Those fewer speculators who attempt to play the Gold & Silver futures
markets are periodically punished by using the Commercials (which control
the major mines via banks and hedging) to short as high as necessary to
break the back of the longs.
However, the weakness of the cabal, is that increasing volatility also
increases the risk of a derivative failure. The way this risk gets
mitigated is that larger entities swallow failed entities (essentially
more liquidity created by the cabal). Towards the end, the Central
Banking cabal will own all of the derivatives, via their largest
subordinate institutions, as it is their paper money and their liquidity.
This breaks down for the cabal in that they must forever increase
liquidity in order to maintain the incentive for the ever growing number
of players in their system.
The problem for the cabal is leakage. With $600 trillion in derivates
projected for end of 2007, growing at 20 - 30% per year.
www.financialsense.com/editorials/rubino/2006/1009.html
"...there is only $798 billion in actual cash in existence, and my
wonderful SMHB wonders how that little bit of money can produce an $11
trillion economy, a national debt of $9 trillion, consumer indebtedness
that is over $30 trillion, $80 trillion in accrued federal government
liabilities, $450 trillion in derivatives, a $600 billion annual federal
budget deficit, and an $800 billion trade/current account
deficit..."
www.safehaven.com/showarticle.cfm?id=6970&pv=1
"...certain participants at last week's meeting in Davos were of the
opinion that the growth of the $450 Trillion derivatives market has helped
reduce market volatility by spreading credit risk. It should be
remembered, however, that this is no different then a bookie laying off
risk. The risk still remains - its just been dropped off onto someone
else's lap..."
Leakage is a problem for the Central Banking cabal, because with $600
trillion in derivatives liquidity by end of 2007, and the
Gold market much less than $1 trillion and the trading Silver market much
less than $0.02 trillion, it would only take about 1/10th (maybe
even only 1/100th) of 1% of the people who invest to move their
investments to Gold & Silver, and the Ponzi scheme would burst.
www.silverstockreport.com/email/The_Money_Chart.html
In fact, notice that a much smaller percentage of people is needed,
because wealth is not distributed uniformly in the population. And notice
that with derivatives growing at $150 trillion per year (and accelerating
as they must), the percentage of movers needed to send Gold & Silver to
the moon is decreasing always.
This derivatives game was started in 1980, and it is nearing it's breaking
point. We will probably get a blow-off top in derivatives over the next
several years, with Gold & Silver fiat prices more highly leveraged than
the derivatives, due to the relative size math explained above.
There is no other way. There are no more paper games the Central Banks
can play after derivatives. They will be forced to defaults and thus will
need other forms of control in order to maintain their hegemony. That is
why they have turned to more draconian control measures, such as Patriot
Act, Executive Orders, wars, and moving (diversifying) their producing
assets overseas to virgin nations.
Realize that base metals and commodities in general can not perform the
function of Gold & Silver in this monetary environment we have unfolding
now. They can only capture excess speculative investment in the Ponzi
scheme of Globalization (SuperCycle). But they don't have the fundamental
leverage to money and derivatives as explained above.
The question is how much larger can derivatives grow, before the
fractional leakage into Gold & Silver overwhelms???
2007-2008 is a transition period. A new level of
liquidity+derivatives+volatility (remember what I wrote at top, that
increasing volatility is signal of acceleration of derivatives growth)
acceleration is occurring now and the Central Banks will try to keep the
wool over our eyes as long as possible, but that transition is
inevitable.
As that awareness becomes clearer to more people this year, I think it
will be a "what will go up faster" speculative mania that ensues. All
commodities should benefit for a while, but Gold & Silver will be the
final ones standing in the end. When is the end? I don't know, but I
know it will be accelerating. Again I see general commodities will fall
behind by at least 2012, probably 2009 or 2010. I will not stay in
uranium and base metals beyond 2009.
With increasing volatility, the Gold & Silver leverage will increase. We
can also trade that volatility, but I suggest only trade a % relative to
the percentage gain. And adjust your percentage gain expectations upward
each year. In other words, if say gold jumps up by x% over 200DMA, then
sell say y% in anticipation of dip, but increase the x% annually, as risks
of selling too low are increasing.
March 7, 2007
antithesis@coolpage.com
Shelby Moore is sole creator or contributor to numerous commercial
software, e.g. Miningpedia.com (2006-), TurboJet, CoolPage (1998-). WordUp [archived] (1986-1989), Corel Painter (1993-95), EOS PhotoModeler, etc..
www.coolpagehelp.com/developer.html
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