The purveyors of over the counter derivatives continue to produce them.  When you hear talk about stabilizing the current system, you should know that this just means more of the same.  Any real effort to fix the problem will explicitly involve a ban on these financial weapons of mass destruction and an attempt to force settlement.

Under the best of circumstances, perhaps 90% of outstanding over the counter derivative contracts could be settled.  That would leave 100 trillion dollars worth.  So ultimately, under the best of circumstances, the US Treasury will have to monetize 100 trillion dollars worth of bad debt. 

Assuming that this happens and assuming that during this process all faith in the US dollar (and all other fiat currencies) is destroyed, then the only way that faith could be restored would be via restoration of the gold standard.  Now I don't think for one minute that the US still has 8,133.5 tons of gold in reserve, as is reported.  However, let us assume that one way or another the US could procure that much gold.  Converted to troy ounces, the amount is 237,227,000 ounces.  Assuming full backing of 100 trillion dollars that comes to $421,500 per ounce.  Now the 100 trillion dollar base is something like ten times the current dollar base, so let's assume that this means that the $421,500 per ounce is really only worth $41,250 per ounce in today's money.

You say that this is absurd?  I say that this is our last best hope for preserving our culture, our technology, our very survival.  But it all starts by putting an end of the madness of over the counter derivative contracts.  Until you hear those words coming from Washington DC, you may safely assume that the fraud continues.

Vincent Bressler
vincentbressler@yahoo.com

-- Posted Monday, 29 September 2008 | Digg This Article