Sorry London Trader, but the "Biggest" Ponzi scheme is reserved for the Social Security in the United States. However, the "Second Biggest" you can reserve to describe the London Bouillon Market Association, LBMA for short.
If you question this, check out these parameters: there is 5,000 tons of silver traded at the LBMA along with 600 tons of gold EVERY DAY. That is equal to the annual production of gold and silver in the whole world. Thus, the number of contracts sold is ONE HUNDRED TIMES the amount of actual metal sold.
Why do we call the LBMA a "Ponzi scheme?" Because it meets the first criterion of a Ponzi scheme: the promise of returns (or in this case, deliveries) that just simply can not be made.
Silver and gold supply for delivery is extremely tight and those buying bouillon must wait for weeks. We also suspect that much of the world's supply of silver in storage has been pledged to cover the paper silver. Same thing with gold.
Thursday, October 18, 2012
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