Six Reasons to consider Gold over Paper Currencies. A Story in Two Chapters.
Chapter 1 will indicate 3 Reasons published today. Chapter 2 published tomorrow.
Reason #5 - Exters Pyramid
Exter's Pyramid, also known as Exter's Golden Pyramid or Exter's Inverted Pyramid, is a financial model that illustrates the relationship between risk and size of asset classes. It was created by American economist John Exter in the 1960s.
The pyramid is inverted, with gold at the bottom and derivatives at the top. This reflects Exter's belief that gold is the most reliable store of value, while derivatives are the riskiest asset class. The different levels of the pyramid are as follows:
Gold. Gold is the most reliable store of value because it has intrinsic value and is not subject to government or financial institution manipulation.
Physical cash. Physical cash is backed by the full faith and credit of the government that issued it, but it is still subject to inflation and other risks.
Bonds. Bonds are loans that are issued by governments or corporations. They are considered to be relatively safe investments, but they do not offer the same level of protection as gold or physical cash.
Stocks. Stocks represent ownership in a company. They are considered to be more risky than bonds, but they also have the potential to generate higher returns.
Derivatives. Derivatives are financial instruments that derive their value from another asset. They are considered to be the riskiest asset class because their value can be highly volatile.
Below is an extrapolation of Exter’s Pyramid by my friend (living in Poland) Parallel Mike (the graphic is cut off at the bottom where he documents amount of Forest per person as 1.2 acres)
Reason #4 - Inflation
Below is a simple graphic from colleague Nick Giambruno of FinancialUnderground. When you create this much paper money (out of thin air) it creates a system where more dollars are chasing the same goods and services. Increasing the money supply is the classic definition of inflation even though there have been recent attempts by Central Bankers and the Parasitic Class to redefine this classic definition.
Giambruno states, “the US government has printed more money recently than it has for its entire existence. It has expanded the money supply by more than 39% since March of 2020.
It’s the biggest monetary explosion that has ever occurred in the US.
In short, if your after-tax wealth hasn't increased by 39% since then, you aren't keeping pace with the monetary debasement.”
Reason #3 - Central Banks are Buying Gold at Record Pace
U.S. dollar hegemony is over, meaning we are now watching in real time the dwindling dominance of the U.S. dollar in the global monetary system.
This means the dollar must share the stage with other trade methods (international trade, investment, and financial transactions.)
Other nations are also dumping their U.S. Treasury percentages in favor of Gold.
According to the latest data from the IMF, the Central Bank of Libya has reported adding 30 tonnes to its gold reserves in June. Total official gold reserves now stand at 147 tonnes, 26% higher than at the end of 2022 and the highest on record (back to end 1956).
The Qatar Central Bank added 3 tonnes of Gold to its reserves in July. This lifts YTD net purchases to nearly 5 tonnes, taking total gold reserves to 97 tonnes [via IMF IFS].
Central Bank of Turkey data shows that its gold reserves rose by 17 tonnes in July, adding to the 11 tonnes bought in June when it resumed net buying after heavy net selling between March-May. YTD net sales total 85 tonnes, with total gold reserves at 457 tonnes.
The Czech National Bank added 2 tonnes to its gold reserves in July. Year-to-date net buying now totals nearly 10 tonnes, with gold holdings over 21 tonnes.
The latest data from the IMF shows that the National Bank of Poland increased its gold reserves by 22 tonnes in July. This brings year-to-date net purchases to 71 tonnes and lifts total gold reserves to 299 tonnes.
The People's Bank of China reported gold purchases of 23 tonnes in July, lifting year-to-date purchases to 126 tonnes. Its gold reserves now stand at 2,136 tonnes.
Source, World Gold Council [data via IMF IFS]
Tomorrow we will publish the top 3 Reasons.
