It started a few days ago with silver – when the Chicago Mercantile Exchange increased the amount of money you had to put up to trade silver futures contracts.<\/p>\n
Reportedly, George Soros liquidated his Silver and Gold positions – but I’m not sure that rumor is well sourced.<\/p>\n
So today almost everything is in free fall – oil is down almost 10% in a day – but it’s not because the dollar is suddenly worth more.<\/p>\n
This has the feel of a speculative bubble bursting – the more things drop, the more people who borrowed money to pump up the bubble will face margin calls and be forced to exit their positions by selling, creating further pressure on downward prices, which then picks up momentum, wiping out more and more wealth that never existed.<\/p>\n
The big risk is if things fall too fast, people won’t be able exit before they are completely wiped out – whoever loaned the money will then be in a liquidity squeeze. In the worst case scenario, the exchange could fail if it is unable to stand behind the trades.<\/p>\n
As to why this is happening, it still isn’t clear. Yesterday, it was concern the economy is slowing down. Whatever is going on, we’re back to a September 2008 moment.<\/p>\n","protected":false},"excerpt":{"rendered":"
It started a few days ago with silver – when the Chicago Mercantile Exchange increased the amount of money you had to put up to trade silver futures contracts. Reportedly, George Soros liquidated his Silver and Gold positions – but … Continue reading