Those are logical questions, but the event that triggers the collapse doesn’t matter — and here’s what I mean by that.
Imagine you’re on a mountainside and there’s snow building up and it’s still snowing and you’ve got some avalanche danger… it’s windswept, it’s unstable. You’re watching the snowpack, and if you’re an expert, you know it’s going to collapse and it could kill some skiers or wipe out the village.
Well, here comes a snowflake, it disturbs a few other snowflakes, that spreads, it starts to shoot, it starts to slide, it gets momentum, it comes loose and the whole mountain comes down and buries the village.
Who do you blame? Do you blame the snowflake or do you blame the unstable pack of snow?
I say the snowflake’s irrelevant. If it wasn’t that one, it could have been the one before or the one after or the one tomorrow.
The same goes for the collapse of the monetary system. It’s the instability of the financial system as a whole. So, when I think about the risks, I don’t focus so much on the snowflake, it could be a lot of things that trigger the event. It could be a failure to deliver physical gold because gold’s getting scarce. It could be a Lehman type of collapse of a financial firm or another MF Global. It could be a prominent suicide. It could be a natural disaster.
It could be a lot of things, but my point is, it doesn’t matter. It will be something that causes the system to collapse. What matters is that the monetary system is so unstable. The blunders have already been made. It’s not as if we’re going to do some bad things that’s going to create risks. The risk is already there. It’s embedded. We’re just waiting for that catalyst.
So as to what will cause the global monetary system collapse, my answer is it could be a lot of things, but it doesn’t matter. What matters — and what investors need to be concerned about — is the instability is already baked in the pie.
Now, as to when this will happen, it will be sooner than later. By that I mean three, four years. This is not necessarily something that’s going to happen tomorrow, (although it could) but that’s not a ten-year forecast either, because we’re not going to make it that far and we never do.
These things do happen every four or five years. The dynamics, what we call the scaling metrics, and the size of the financial system and risk. One definition of risk is: What’s the worst thing that can happen?
It’s not a linear function. It’s an exponential function. What that means is that when you triple the system, you don’t triple the risk. You increase risk by ten or a hundred times.
That’s what we’re doing. We’re out there making the San Andreas Fault bigger so we can have even bigger earthquakes in the future. That’s exactly what’s going on.
- Source, The Daily Reckoning, Read More Here
