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<p>[QUOTE=&quot;InfleXion, post: 1767388, member: 29012&quot;]I completely agree with Jolumoga. Yes the paper price can go lower, and if the derivatives market starts unravelling it will impact all paper prices. I consider this an eventuality considering that last month the BIS reported there are $441 trillion of interest rate swap derivatives, and that is a lot of money at stake if interest rates start to rise which will occur if QE loses effectiveness or if the Fed tapers outright&nbsp; (not likely considering the dominoes I just outlined).</p><p><br /></p><p>Point being the paper price can and may very well go to zero, but as we know the cost to get it out of the ground and refined is roughly $20/oz so you can bet that the only people who will sell it for cheaper than that, regardless of the paper price are those who are hedged, those who are willing to sell for a loss, or a handful of old hands that bought at cheaper prices. The majority would be from dealers who hedge, and hedging does not happen without derivatives.</p><p><br /></p><p>By nature a derivative is not a real asset because it is derived from the value of something external to it. In a world where derivatives can be created based on other derivates the result is infinite counter party risk chains, and thus quadrillions of dollars are leveraged at magnitudes of between 50:1 (standard in the too big to fail realm) to 400:1 (Goldman Sachs) as interest rate swaps are only a portion of the total.</p><p><br /></p><p>So then we can deduce that this particular $400+ trillion of derivatives, which were very congenial on the way up to balloon balance sheets without adding any underlying value, will require over $20 quadrillion in assets if they are to ever unwind. Considering all real assets on the planet add up to roughly $1 quadrillion by most estimates this does not appear to be a situation that can be remedied without default, and at that point we won&#039;t be measuring wealth in any sort of paper.[/QUOTE]</p><p><br /></p>

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