Friday, January 30, 2009
Kudos to the Guardian for getting at the root of the problem in the very first paragraph of what is a nicely done interactive graphic on the financial crisis.
That little red circle is the amount of money injected into the financial system over the last year or so, roughly $1.9 trillion. Atop that are banks' gold reserves, cash in circulation, the traditional banking system, and the shadow banking system.
The big kahuna atop them all - some $290 trillion worth - is the great global asset bubble.
Regarding gold reserves, they note the following:
Ever since central banks stopped pegging their currencies to the price of gold, money has been a nebulous concept: a promise to pay the bearer, or "cheque" from the central bank, rather than a permanent store of wealth.It's hard to get really big asset bubbles when money is anchored to something.