Emotional Tipping Point

Consistently experienced emotions gradually shifts the balance of power one way or another. If no other explanation is considered, you will conclude or observe that changes tend to happen suddenly. There is a point where balance tips. Confidence in the current economic systems ability to manage monetary policy is approaching such a point.

The issue presents itself between paper (contractually derived values) assets and physically held assets. As an example we will consider a stack of dollar bills balanced against an ounce of physical gold. As confidence is lost in the fiat dollar, ever increasing numbers of bills are required to balance the scale. The scale will tip when confidence is lost.

For many years, the economic powers have been racing to reduce the ‘value’ of their currency to gain advantage in world trade. Gradual changes in value being always lower reduces social confidence in paper assets. Confidence is maintained by ‘side bets’ to cover dramatically changing prices. These side bets are known as derivatives.

Derivatives are unregulated. Nobody knows the total weight (quantity) of derivative contracts.

Banks carry quadrillions of such contracts. These contracts are valuable to the extent of the bank’s ability to pay. If derivatives are triggered by shifting prices, this too is a potential tipping point.

Society is approaching an emotional tipping point where no amount of confidence remains on the paper side of the scale. Only physical assets will have value. Possession of a plow is better than a rehypothecation of the right to use a plow.

Here is today’s beauty.