$50,000 Gold And John Exter's Pyramid - Podcast

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About: SPDR Gold Trust ETF (GLD), Includes: SLV
by: Doug Eberhardt
Summary

No, this article is not meant to one up Avi Gilburt's 25,000 gold article.

But it is a realistic discussion on what gold can do with a loss of faith in the Fed.

What is John Exter's Inverse Pyramid? Who is John Exter?

What is a deflationary credit contraction and what are the odds of it occurring?

According to Wikipedia, John Exter was an American economist, member of the Board of Governors of the United States Federal Reserve System, and founder of the Central Bank of Sri Lanka. He is also known for creating Exter's Pyramid (see graphic below). According to his son-in-law Barry Downs, who I had the pleasure of interviewing for this podcast, John Exter was "the only honest central banker."

What the Fed has done to their balance sheet by is a new frontier for the financial world, and most don't understand what it really means. Most can't see a credit deflationary contraction on the horizon, and they'll wake one morning and see much of their wealth was destroyed, possibly in quick fashion.

What started this new era of the Fed and monetary intervention was the 2008/2009 financial crisis. What's coming next is going to be monumental. But it takes someone who has lived through a past monetary crisis to put it all into perspective. That's what you'll hear with the interview of Barry Downs and his comments about John Exter. While this may be the summer of fun for the stock market as we move to a new all-time high, smart money will be exiting before we see trouble later this year. But there will be some places to put your money that we discuss thoroughly. That asset is gold (and silver). It's the only asset that sits outside the risk pyramid below.

Money will flow down the pyramid during the crisis, looking for a bid. But as Downs puts it, some assets may have no bid. And eventually, when many realize the Fed is losing control of the situation, you'll be hard pressed to find anyone selling their gold too. I did ask Barry Downs what he thought the price of gold would get to. While the title of this article gives it away, you have to put his estimate into perspective in what a real monetary crisis would look like. And you have to view gold as insurance for this crisis because over time, it maintains its purchasing power.

If you haven't bought gold or silver yet, the best bet is to have control of your wealth with holding the physical metal, but a substitute for it would be its respective ETFs (GLD) and (SLV). Just make sure you read the prospectus and know the weaknesses of holding a paper asset versus the real thing that sits outside the pyramid.

The video below gives a good indication of what gold will do in the coming years. I hope you find it educational as to what it once was and what it has become regarding the Fed too.

Exter

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.