re: #606 Parker in US

Your right there is not enough gold in the world to back the dollar so what is the the cause of this depression?

First, it ain’t a depression. yet.

Second, the financial system operates on borrowed money. The money supply depends on borrowed money. Without borrowing, economies grow very slowly and businesses have a very difficult time forming (which is partly why oil poor Islamic nations find themselves in systemic poverty).

Third, borrowing is predicated on stable risk profiles for assets and borrowers. BOTH of those risk profiles got thrown overboard via tinkering with the community reinvestment act and the implicit promise of the government to take on any obligation that Fannie and Freddie took.

Fourth, traders and banker had convinced themselves that they had created a complex system of derivative trades that reduced both asset and borrower risk to zero. They thought they had leveraged the black scholes formula into perpetual prosperity.

They were wrong.

That isn’t a reason to return to the gold standard just as a failed drug trial is not a reason to return to leeches as therapy.