Gold News

The global liquidity pyramid

What's stopping the US Dollar from doing what it must – and collapsing...?

"Global demand for the Dollar is now driven by the explosion in Dollar-denominated assets," writes Dan Denning from Melbourne, "almost completely out of the control of central banks."

Dan says these "assets" are the preferred retirement vehicles for millions of Western Baby Boomers...and the quickest way for money shufflers in London, Washington, Sydney and elsewhere to get rich on the flow of cash. They outweigh government-issued money – referred to as 'power money' by Independent Strategy in the chart above – by a factor of 85 times.

"Only a radical increase in official interest rates or a radical decline in Dollar confidence will change the incentives to create new assets denominated in Dollars," says Denning.

Will either event happen in 2007? Or will gold have much further to rise before the scramble for settlement hits...and $340 trillion in derivatives – plus $59 trillion in bonds – tries to turn itself into $4 trillion of government-issued money?

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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