Lets talk about gold. Ok, so what does gol’d's recent price action mean? Instead of writing a long essay and article, I’m posting the Funnel of Liquidity. You can learn a lot from the picture below.
- think Credit Default Swaps – non-performing assets today
-Mortgage Backed Security Market (MBS) – currently frozen (illiquid)
-Stocks recent run has been assisted due to the liquidity (debt) injected into the system – meaning temporary
-MUNI Bonds – Think state of California having to issue IOUs to workers recently as they are out of money
….this is how things unwind – paper assets with no value go up in smoke and eventually you are left with the only form or universal “real money” which is gold.
Remember that 100 years ago, all currencies were backed by gold and today that number is 0. The US Dollar is the world reserve currency, with the EURO and Yen the other major 2. Euro, Yen and Dollar are what makes the world financial system move. But all other currencies are simply derivatives of the US Dollar.
Gold is now taking center stage as the only “real” currency, meaning it will float Inverse to the fiat system as a whole. However, it is also possible that the USD and gold move in tandem as money seeks the ultimate safe haven.
The Funnel of Liquidity
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