Wednesday, December 21, 2005

The great Gold paradox (part I)

Some(most ?) people still wrongly think that gold is just another commodity that lost its monetary role a long time ago. It’s true that since 1971 when President Nixon closed the gold window (making the dollar inconvertible to gold directly, except on the open market) the global monetary system is not officially backed by gold.
So in 1971 a great economic experiment have started – a completely ‘free’ global money system where central banks, commercial banks and politicians have a very high level of flexibility to control the amounts of money .

Needless to say the result over the last 35 years was an exponential growth of money amounts & Debts along a severe loss of money buying power (Inflation).
However, central banks continue to hold large amount of gold reserves (for a very good reason!) just in case this ‘great’ experiment will fail…

Please review the latest BIS OTC derivatives review - (pay special attention for sections D & E of table 1 on page 10.)

More later... real1

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