We know the answer to these questions today - derivatives. But we are only beginning to recognize the impact of these answers. It is one thing to fractionalize fiat money for the purposes of lending. But what are the implications of massive financial positions (14+ times global annual GDP) in key global markets like foreign exchange, interest rate, equity and commodity?
These annals are filled with reminders of these implications. These position holders completely eliminate supply side economics (still effective in the 1980's with Paul Craig Roberts under Reagan). Underlying physical assets increasingly represent a diminishing fraction of their hypothetical value - hypothecated values as real in currency terms as if the underlying physical asset in said amount exists in the "here and now". The impact on controlling prices in key markets is substantial. Forget about sound banking 10:1 ratios - those are a barbarous relic. As always recognized in these annals, we now have a chart whereby we can visualize how oil price is controlled just like gold:
But it all really started with gold, since to hyper-fractionalize gold freed the currencies to be hyperinflated to derivative levels (1.7 quadrillion notional?) without having the true price of gold realised. If it was known that a real ounce of gold is worth 10 (or 100) paper ounces, gold would trade at 10 times (or 100 times) it's current price. Such a world would destroy the credibility of our currencies, and the currencies themselves with it. So we continually choose functioning currencies over the unknown impact of a systemic crash. And here we are today.
We hear more and more about not just a "fake gold market" but increasingly an entire "fake world" of prices, markets, statistics, polls, elections, behaviors. Yes, there is indeed a global societal harm in unrestrained financialization as the dominant (and growing) component to developed market economic growth and GDP, as we transfer the derivative wealth effect of hypothecation to every aspect of life on earth.
Our world is truly a derivative matrix, powered by the unlimited wealth creation capability of our fiat-currency-derivative system, dominated today by the dollar system, and enabled by the hyper-hypothecation of gold.
To have a "free market" in gold, the paper gold market must die, and for that to happen, either the currencies must come under great stress from loss of confidence (then loss of function) or we can simply agree to abolish the entire derivative system and make it punishable by death to fractionalize good delivery gold. The effect would be the same - we would be transforming from a debt based to an equity based system. Do not reference past gold standards, as a free market in gold has never truly been in effect during their reign.
Which is more likely: currency destruction or humans miraculously and simultaneously abandoning their human nature?
The signs of the more likely outcome are growing in the thoughts of both little people and Wealth Giants alike. Thoughts of value are changing. And our times, they too are a-changing. They always do, they always will ... and in the end, time proves all.