Failure To Deliver (FTD)

Those are the three words that no futures or other market wants to have associated with it.  But that notice is all but a certainty to happen some time in the near future.  The leverage in the gold paper market is estimated between 50 and 100 times the actual metal.  This is virtually no different than what some of the banks have been guilty of on their balance sheets.  When times are good, unbelievable profits can be generated on borrowed money thus creating huge bonuses for traders and their management.  They grow accustomed to the “good life” and just like drug addicts, they need more of their drug to maintain the euphoria.  As with addicts the crash ultimately will come.  Addicts must hit bottom before they can or will truly reform and take another path.  Some addicts must bump along the bottom for awhile until they finally have the resolve to reform.  On a macro scale, the West is in a similar scenario.

At some point, markets are going to wake up and realize the music has stopped.  Insurance companies cannot fund their future obligations with 0% return on investment.  Governments cannot fund their pension obligations with non-performing investments.  Sovereign debt in Spain and Italy is not being fully funded even at higher rates.

FTD can happen in a microsecond and you could observe a “bank holiday” in the futures market.  The price of gold would immediately soar to new highs and silver would follow.  The financial system is heading for a reset of some type.  Will it be a gold-backed system or a Heaven-backed system?  If it is a gold-backed system, you would be ahead to own some of the physical metal.

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