billion position in iPhone maker Apple (AAPL) and $800 million in social-media titan Facebook (FB). And the Swiss bank continues to expand its balance sheet at almost $100 billion a year. Its total balance sheet has now grown to around $700 billion. That’s almost $90,000 in securities per citizen... and growing every year... just by printing more Swiss francs . In M.C. Escher’s most famous prints, the viewer can’t figure out which way is up. In Relativity , a maze of stairs interconnects – each with a different gravity orientation. The paths wind and intertwine. There is no “up.” There is no “down.” (See image to the right.) When central banks around the world begin to spend trillions on financial assets , the same thing happens to the world’s financial markets. When stocks become the basis of our global financial system... stocks are the money we use... there’s no way to exit the risks of the equity markets. There’s no up. There’s no down. There’s no limit to the
resulting possible inflation. And there’s no way to predict when the value of the currency will collapse. When money has no firm value, it’s impossible to
know what something’s actually worth... or if an investment makes sense... or is safe. Today, as stocks rise by huge amounts all over the world, investors are cheering these central-bank moves... But they may rue them tomorrow. After all, if these investments sour, how will investors flee to safety... when inflation forces central banks to stop the inflation and to increase interest rates... how will investors find safety?
will investors seek in a crisis? Official currencies? They too will be tied to the success (or failure) of Apple’s new phone... or of Softbank’s latest gamble. Like an Escher maze, there may be no conventional way out of the next crisis. There may be no way to get to level ground. We’ll look at one possible “out” for investors in our July issue of American money – like Bitcoin. But whatever happens next, just remember... the soaring stock prices you’re seeing aren’t real. They’re just stairs – in a giant financial Escher print. Consequences . We’re focused on gold, oil, and even new forms of
When the Swiss franc is backed by shares of Facebook... and the
Japanese yen is backed by Fast Retailing... and the U.S. dollar is backed by mortgages... what firmament
American Consequences | 21
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