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Financial Crisis Dynamics, the ‘Shadow’ Gold Demand, and Mene

by John Butler
Gold Money

The study of financial crises is as old as the economics discipline itself. One of the most prominent theorists of financial crises ever to hold a senior Federal Reserve policy position was John Exter, vice-president of the New York Federal Reserve during the 1950s. Several years ago I co-wrote a series of essays on Exter’s theories together with his sonin- law, Barry Downs. In this paper, building on Exter’s work, including his eponymous ‘pyramid’, I introduce a new ‘hourglass’ framework for understanding the role that gold plays in helping to resolve severe financial crises, in particular the concept of the ‘shadow gold supply’. I conclude with some observations about how Goldmoney’s new 24k jewelry initiative, Mene, brings essential liquidity to this potentially vital if largely unseen sector of the global gold market.

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