[MUSIC] Hey, you know what? If we want to talk about gold, we have to, we just have to, mention ketchup. And to be more specific, ketchup inflation. Now, let me illustrate this. Now you remember the Big Mac? The Big Mac we showed? There were three actually when we talked about currencies? I'm sure you've been through this experience before, it's quite a difficult experience, but I'll show you what I mean. You have this, ketchup and you want to add a bit more on this Big Mac, because you think it's a bit dry. So, you start taking the bottle, and you start shaking it. And you keep on shaking it. And you keep on shaking it and nothing happens. And there you go. So this is the story of ketchup inflation and we'll see what we mean by that. Actually it's a story of central banks when they put in money. This is the ketchup inflation, this is it. [SOUND] So now that you have a sense of what ketchup inflation is, we'll see how you can hedge against this type of very nasty event. But before we have a look at this kind of hedge, let's see what gold can provide you as an insurance against some type of nasty events, and one of the example here is the stock market. Indeed we can see from this chart that gold can hedge you against adverse movements in the equity market. What you see from this chart is the red, the evolution of the price of gold in US dollar and in percentage term year over year. And we have the same percentage term year over year for the blue line and but that's the world index as captured by the MSCI. Again, now you know me a bit [LAUGH]. I use this funny scale, the right-hand scale is inverted, so and a fall in the red line is actually an increase of the value of gold. And we can see that we have two of these periods when the stock market went through a severe crisis. We can see that for instance when the stock market tumbled by 20% at the beginning of the year 2000, the gold price rose by an equivalent percentage of 20%. And also during the so-called great recession, when the stock market collapsed by more than 30%, the price of gold rose by the same percentage. So there is, indeed, this good correlation, by and large, between the evolution of gold and that of the stock market. But I would say if there is one reason to own gold, it's the insurance against this. Now what is this? This is a black swan. You remember the introductory video we did, the park? And when we saw that black swan. Well, the black swan idea in finance is one of a very unlikely event but if it happens it has very, very nasty consequences. This is for instance, the Fukushima in Japan. The nuclear plant which bursts and leads the country into a severe recession. So black swans should not be underestimated because they are very unlikely, and more often than not people stop their and say, it's very unlikely therefore I should not bother too much about it. But no, that's wrong because you should combine the probability, but also the damage that it leads to. The two combined makes you that you should consider black swans. A very unlikely event, but very nasty consequences. Now let's have a look at another example then for Fukushima, as the black swan. And one of these example is the so-called Ketchup Inflation. Now you saw in the introduction video what it means [LAUGH]. Why we use this idea, you can Google ketchup inflation, you will see what it actually means. Well, what does it mean? Well, ketchup inflation comes when central banks print money. We know that indeed, there's always a link between money creation and inflation. Normally this link is stable. Central banks can embark on excessive money printing, for instance if they have to finance public deficits. They embark into this quantitative easing, this unconventional policies and money supplies goes through a staggering increase. So if you print too much money, at some point maybe there is a risk that people lose faith in this paper currency, and they say it's not worth even the ink which is used to print those currency. So what happens then is that people, when they get their wage, they start rushing to the shops and buying goods, because they fear that, maybe at the end of the month, the price will have risen. And so what we get is a so-called increase of the velocity of circulation of money. The money is given as a wage and people spend it at an increasing pace. And this increasing space of spending the money, of circulating the money, leads to a spiraling inflation. Inflation starts increasing and increasing and increasing and ends up in hyper inflation. So, ketchup inflation is precisely that. At the beginning your pre-money, you shake the bottle and nothing happens. But you keep on shaking it and suddenly splash, inflation is there and once it's there, it's kind of self feeding. Inflation today leads to more inflation tomorrow. So this is the kind of very nasty event. A black swan, meaning something very unlikely but with very nasty consequences. So by now, you know what is the main reason why we call this set of three videos Gold, the Ultimate Currency. If this very unlikely event happens, there is a rationale to think that gold would be used again as an anchor to the International Monetary System and would be considered as a stable currency. So, in conclusion, we've seen with this side of free videos, that gold as served many purposes in finance. But basically as a means of exchange throughout history going back to 3000 BC. But it can also serve as a hedge against many things. Against the collapsing Dollar, against political tension, against rising inflation, against stock market crashes, and last but not least, against so called black swans. Very unlikely event, but if they do materialize, hey, watch out. This is a very, very bad thing that can happen to you. [MUSIC]