$50,000 Gold and John Exter’s Pyramid – Podcast

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 in pushing it at one point to $4.5 Trillion through quantitative easing and buying up of assets during the financial crisis of 2008/2009 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 and 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 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. I really don’t use fear in my articles, but trade both sides and follow trends, however, after interviewing Downs, I may start doing it more and more. While this may be the summer of fun for the stock market as we move to a new all-time high, the 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, for some assets there may be 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.