Hi,
John Exter is said by some to be the most honest central banker in history. Of course, the bar is not set too high as central banking is rife with opaqueness that causes most of the public to be highly unaware of what goes on within this sector of the economy. However, before his retirement, Exter created what is now known as Exter’s Pyramid. His pyramid was meant to clearly outline the path at which value would travel during economic calamity, and today, you can clearly see Exter’s Pyramid playing out right before our very eyes; this being hugely bullish for silver and gold investors. Below you will find a picture of Exter’s Pyramid and as we go through this newsletter, you will begin to see the path for higher silver and gold prices become clear.
Due to world central banks collectively keeping interest rates at zero for well over a decade – cheap currency funnelled into the market at a rapid pace. That alone is what allowed for the top tier of Derivatives to balloon to what is now said to be MULTIPLE quadrillions of dollars. You read that right, quadrillions. This has caused massive bubbles in almost all electronic asset classes, which is where Exter’s Pyramid comes in to show where value rushes to when the risk becomes too overwhelming for the market or when risk turns into outright pain during an economic crisis.
As interest rates have gone up, servicing the debt that companies needed to take on to fuel massive derivatives trades also rises – this causes a contagion of selling as investors rush to raise the capital needed to pay the rising interest on their debts. You are seeing this in Europe where energy companies have announced they will need trillions to keep their doors open and energy flowing, just in time for winter. And in actuality, this contagion started over a year ago when stimulus checks stopped fuelling the rapid growth of major stock indexes. The ripple effect has been felt in these indexes as electronic currency continues to flee to a safer tier in Exter’s Pyramid. Look at this indicator below – many people remember that stocks tanked in 2020 after Covid-19 was announced, but what people do not realize is how much more severe the current drop is now than it was then.
What this is showing is the number of days the S&P 500 has traded below its 200-day moving average – the current streak has breached 100 days – a streak that was previously breached only during the tech bubble and the global financial crisis in the past 30 years. In both of those instances, the gauge posted most of its losses after surpassing that level, with the index declining by a further 50% in 2000-2003 and 40% in 2008-2009 before bottoming out. It is clear further drops are coming, and as Jerome Powell warned at the last FOMC meeting – “expect pain”—this is nowhere close to being over.
From that point on in Exter’s Pyramid the rush becomes more evident – real estate absorbs what rushes from stocks and the greater derivatives market, which has now also began to crash over the past months. The next rush as people watch real estate prices plummet is to the safety of government bonds – because, you can’t find more of a sure thing than the government owing you money, right? Wrong. Bank of America recently announced that global bond market losses are on course to reach there highest since 1949 with no end in sight. Overall investor sentiment has also dropped as low as it was prior to the 2008 financial crisis – it appears the rush from bonds is already on. Next step, bank money and cash. This is the step we are currently on around the world (marked by the relative strength of the dollar increasing as people rush toward it touting the USD is as good as gold), with some major economies having already surpassed this level dropping down toward gold and silver. It has not been as poor of an investment this year as major reporting would lead you to believe.
When the argument is trying to be made that gold and silver can protect citizens of developed nations from a currency collapse, it is usually followed by comparisons to Argentina, Venezuela, Turkey, etc. that saw horrific conflict destroy the purchasing power of their currency, sending gold skyward. However, a fair rebuttal is that these are emerging markets and that this could never happen in a developed nation with a strong currency. While fair, is it true?
The world’s longest standing currency is the Pound Sterling or the British Pound (GBP) with its use dating back almost 1200 years and at one moment in time it actually held world reserve status as the USD enjoys now. The GBP is often used against gold bugs to rebut the fact that all fiat currencies eventually go to zero due to it surviving for so long. However, this argument seems to be coming to an end, as the GBP appears to be dying before our eyes. In addition to that, you can add the Euro, and Japanese Yen to the list of major currencies that are doing what those in opposition of precious metals said couldn’t be done in a developed nation, they are returning to their intrinsic value of ZERO. Look below at the gold price chart; it is clear gold has done its job in nations that are seeing rapid currency decline:
Gold prices (per ounce) over the past year:
JPY = 193,428 JPY to 236,705 JPY
EUR = 1492.39 EUR to 1700.82 EUR
GBP = 1290.88 GBP to 1518.59 GBP
Gold subsequently moved 17.64% in GBP, 13.97% in EUR, and 22.37% in JPY – more than protecting the holder as these increases are above inflation in each nation. The USD and subsequently the CAD are on the same path; all fiat currencies are in a race to the bottom with all that value inevitably being absorbed by silver and gold.
As Shakespeare once said, “better three hours to soon than one minute too late.” The rush for physical wealth held in silver and gold has only continued to increase as people realize the physical price is likely far higher than what the paper derivative price dictates. Protect yourself below with the world’s most secure bullion coin, the 1oz Silver Canadian Maple.
Monster Box – 1oz Silver Maples
