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<p>[QUOTE=&quot;NorthKorea, post: 1312147, member: 29643&quot;]For what it&#039;s worth, $700T in derivatives are:</p><p><br /></p><p>1) Not entirely tied to Euro debt (they&#039;re about 17% Euro debt).</p><p>2) Derivatives.</p><p><br /></p><p>If the entire European zone become insolvent overnight, you wouldn&#039;t see $700T of margin calls. You&#039;d see something more akin to 1-3% of that being the actual insolvency. So, $7T-$21T, of which, 17% would be insolvent. Derivatives trading is almost entirely levered, so there&#039;s not actually $700T at risk anywhere. The actual risk amount is $1T-$3.5T. Even in a total meltdown, there&#039;s value in the debt. Yes, portfolios may be &quot;wiped out&quot; but that is because of leverage, not the tools themselves.</p><p><br /></p><p>People complain about Wall Street derivatives, but no one complains during the bubble, only in the aftermath. The concept of global meltdown of financial instruments, coupled with an underlying environment of &quot;catch-up&quot; inflation, leaves us with a situation where PMs are ripe for bubble growth.</p><p><br /></p><p>Assuming the bubble follows expected trends, we&#039;ll see silver top at $87 (2011 dollars) or $125 (assuming a 50% capitulation of global inflation), but that top will trigger a deflationary period that might plummet into a depression era. The end result (long-term of 10+ years) will be silver bottoming around $17-$22 an ounce, while a loaf of bread will likely cost $8. Silver _should_ normalize to $38 in the long run (20+ years), but inflation will adjust that number downward by 25-40%.</p><p><br /></p><p>To the question of how my long/short approach is different, it&#039;s simple: I&#039;m shorting against the box. I&#039;m only shorting gold that I can cover, if I have to. I&#039;m not taking out naked shorts.[/QUOTE]</p><p><br /></p>

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