Antal Fekete and Doug Noland on the devices of infinite money

1:15p ET Sunday, May 20, 2007

Dear Friend of GATA and Gold:

Few of us laymen are likely to understand fully every point they make, but you really should read the latest essays of two of the best economists of our side. (I'd call it the "hard-money" side but these days the divide seems to be simpler than that, between those who believe in ANY restraint on money creation and those who believe in NO restraint.)

The first essay is "'The Decoy of the Falling Dollar' Revisited" by Antal Fekete, who spoke at GATA's Gold Rush 21 conference in 2005. Fekete argues that the decline of the dollar has proven, counterintuitively, positive for U.S. bonds. The point Fekete makes that may be of more direct interest to GATA supporters is that the currency and government bond markets are both as manipulated as we have shown the gold market to be -- that there really are no free markets in currencies, government bonds, and gold, that these markets are actually the tools of a great geopolitical game that probably will end or change only when the biggest creditor nation, China, decides to end or change it.

You can find Fekete's essay at GoldSeek here:

http://news.goldseek.com/GoldSeek/1179417600.php

Then there is the latest installment of Doug Noland's "Credit Bubble Bulletin," an essay titled "Checks and Balances," at David Tice's Prudent Bear site. Note particularly the section of the essay that is sub-headlined "Checks and Balances," about two-thirds of the way through the essay, wherein Noland writes:

"Today, (unrestricted) securities market finance/liquidity circulates through an expansive and increasingly non-transparent credit system (certainly including Wall Street, 'repos,' securities and derivatives markets, and off-balance sheet 'special-purpose vehicles,' along with foreign central banks). From securities transaction to securities transaction, this process creates myriad new debt instrument IOUs through a multitude of lending processes (some financing the real economy but most financing the securities and asset markets). This unchecked expansion of a broad range of sophisticated securities market-based liabilities, intermediated globally through various types of institutions and vehicles, now comprises the vast majority of system 'liquidity.' This finance cannot be readily accounted for or monitored, let alone regulated by monetary authorities."

Noland's essay can be found at Prudent Bear here:

http://www.prudentbear.com/articles/show/2013

Fekete and Noland thus elaborate on a question your secretary/treasurer tried to pose here in December (http://www.gata.org/node/4667), which this month's meeting of the Committee for Monetary Research and Education addressed: Whether the great new innovation of the fiat money system, derivatives, can preserve the system forever by soaking up its infinite money forever.

Fekete and Noland seem to think otherwise. Since they know what they're writing about and since it is the biggest of big-picture stuff, underlying the purposes of our cause, you really should check it out.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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World Gold, PGM, and Diamond Investment Conference
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Sunday and Monday, June 17 and 18, 2007

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