The Following chart is one we have seen a number of times no doubt. This chart is the ratio of gold to financial assets.
On this chart 1.5% of total financial world assets. I personally think Gold is significantly less that this amount as this chart totally ignores paper derivative contracts and unfunded liabilities which represent a pool of financial commitments and therefore an asset on someone’s balance sheet but not a liability as neither government’s nor finance players record these as liabilities. (Note) In any case the 70s mean was around 30% of all financial assets. If you placed housing and equities on this chart they too would be small %s vs the total. The explosion in financial assets has not come, therefore from either precious metals, housing or equities. Where has the growth come from? From debt, government debt enabled through the banking system has exploded would financial assets. We have seen a 30 year bull run in government debt across the developed world. Most other asset markets have lagged this growth considerably. The question is what happens next? Will the debt be allowed to fail or will it be sustained nominally as other asset classes rise to return the debt to its relative norm. This is, in essence, the great issue which will shape the next decade. Imo, this debt will not be allowed to fail and so therefore we are about to enter a super inflationary period as other assets climb in value normalize these ratios. It will be a messy process with a great many losers, especially holders of government bonds and cash.
(2 votes, average: 5.00 out of 5)
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