“Stuff is getting better” ___ The Postman
When I can go to a Toys-R-Us at 2pm and find that the doorbuster item I want is still in stock ,, plentiful in fact ,, and only 2 registers are open that’s all I need to know about sales this season..
My perspective is that the international financial system has become largely a house of cards, with hundreds of trillions of dollars in paper or electronically created "assets" that are, in the end, not backed up with much of anything having real value. It is a charade, an illusion, a facade that people who are aware of this and who have a stake in sustaining the illusion cannot admit or disclose because of the risk that the game of musical chairs will stop, and in the scramble it will become evident that there are hardly any real "chairs" there to sit on.
Just for one simple example, consider gold. There is real gold; hard physical metal in various shapes and forms. And then there is "paper" gold - financial instruments - options contracts with long and short positions; contracts to deliver gold on certain dates. This paper gold is not backed up by any gold at all - just "promises" to deliver gold if ultimately required to do so. There is 40 times more in "paper" gold - contracts for gold delivery - than there is in fact actual physical metal gold held by people on the entire earth.
This game, this illusion of value exchange, goes along just fine so long as people mutually trade those paper contracts in buy-sell transactions (making $ on average through such transactions), but when other sectors of our financial system and economy unravel to the point that people start demanding contractual delivery of the physical gold (rather than continuing to accept instead more contracts or paper/electronic money), the "value" disappears into thin air with defaults when COMEX closes the gold delivery window.
And gold is just one simple, easily understood example. Mortgage-related "derivatives" are another, even larger example where there is huge supposed book and market value in these paper agreements, but the underlying true redeemable value for tens of trillions of dollars in the agreements is vapor - just waiting to be uncovered and written down to little at all. There are many more, less well understood examples, of huge paper financial assets holding up the increasingly unsupportable lie that those paper assets hold real value when in fact they are not backed by anything of much ultimate value.
This is not a good time to be holding unbacked paper investments. The house of cards is made of paper, and rain is beginning to fall on that paper.
Of course, nobody knows when the game of financial musical chairs will end - maybe it will play on for a while. Maybe it won't ... In the meantime, central banks throughout the world are doing their best to keep the game going a little longer; pumping out new currency and electronic funds in enormous, unprecedented large quantities to avoid the collapse that is building momentum.
Unfortunately, playing the music louder and louder just can't keep the game going on indefinitely.