Blistering tweet from Vince Lanci:
>Isabella, let’s strip away the dollar funding abstractions. Forget the debates about whether there were enough dollars, or whether there’s enough transparency in the lease rate mechanism. Let’s call this what it is: a crowded trade that’s finally blowing up in the faces of those who’ve profited from it for thirty years.
>As traders and risk managers in precious metals (people who sit at the intersection of financialization and physical reality) it’s their job to know. It’s their job to remember that limited collateral in a system with unlimited money carries dislocation risk. It carries collateral crisis risk, as Zoltan Pozsar has pointed out. And that risk can only be kicked down the road so many times.
>Financialization works until it doesn’t. It works until someone steps in and says they want the gold or the silver regardless of whether you think they should or not. That’s a real risk. And a risk manager’s job is to see that potential, to understand that someday he won’t be able to kick the can down the road or buy time to get his collateral back.
>The blind spot lies with the people who knew this and kept doing the trade anyway, hoping to be bailed out or for it to fix itself. The blind spot is greed—failing to see the end of the road for a carry trade that’s outlived its logic. The blind spot is the complacency of those who knew and did nothing, because it wasn’t their problem.
>It’s also in the custodians of these markets who dismiss gold and silver as relics of an ancient time. Even if they are relics, they remain the fallback when fiat is distrusted. Treating something monetary like a trinket in your grandmother’s closet worked for a while. But that era is over.
>Neokeynesianism is dead, and with it, the carry trades. Mercantilism has taken its place. And mercantilism says (right or wrong) that there is no future, only spot. The world has become a sumzero game in the mercantilist mind, and the mercantilists are increasingly the ones running it.
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