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No more market crashes -- and no more markets either
11:47a ET Sunday, July 6, 2014
Dear Friend of GATA and Gold:
Huge divergences in traditional economic relationships are showing up all over the place and evoking much comment and analysis.
Writing at King World News, Ronald-Peter Stoferle of Incrementum AG in Liechtenstein identifies some and suggests that they foretell a stock market crash:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/7/4_Two...
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Writing at Forbes, market analyst Jesse Columbo identifies a bunch more and is even more convinced that a crash is coming:
http://www.forbes.com/sites/jessecolombo/2014/07/01/these-23-charts-prov...
Bloomberg News identified another divergence Friday, between currency valuations and commodity prices and flows:
http://www.bloomberg.com/news/2014-07-03/commodities-obsolete-in-models-...
But these divergences are largely functions of increasing interventions in markets by central banks. As a high school graduate said at GATA's conference in Washington six years ago, "There are no markets anymore, just interventions" --
-- and who is to say that these interventions won't intensify and continue forever?
Six years ago that high school graduate remarked, "Market intervention is exactly why central banking was invented. Intervening in markets is what central banks do. They have no other purpose. ...
"Central bankers are supposed to be more capable of restraint than ordinary politicians, and maybe some are, but they are not always or even often capable of the necessary restraint. One market intervention encourages another and another and increases the political pressure to keep intervening to benefit special interests rather than the general interest -- to benefit especially the financial interests, the banking and investment banking industries. These interventions, subsidies to special interests, increasingly are needed to prevent the previous imbalances from imploding.
"And so we have come to an era of daily market interventions by central banks -- so much so that the main purpose of central banking now is to prevent ordinary markets from happening at all."
The many widening divergences observed lately suggest that central banks are in too deep to stop now, that returning to a market economy would cause turmoil far beyond what the political and economic establishments consider acceptable.
The money-creation power of central banks has become virtually infinite and many of them have already arranged to create infinite amounts of each other's currencies through "swaps" for market intervention purposes. So if, over the course of just a few months, little "Belgium" can appear to purchase more than $200 billion in U.S. government debt --
http://www.reuters.com/article/2014/05/16/usa-treasuries-belgium-idUSL1N...
-- and if central banks and sovereign wealth funds already have purchased $29 trillion in equity investments --
http://www.economist.com/blogs/freeexchange/2014/06/private-markets-publ...
-- what's to keep them from buying whatever amount is necessary to sustain prices forever? After all, central banks operate almost entirely in secret. What's to keep them from buying everything?
That's why the increasing divergences in traditional economic relationships may foretell only more central bank interventions and why the outcome may not be market crashes at all but rather more of what has already happened: the destruction of markets and, with that, the destruction of democracy and the end of the progress that markets and democracy have accomplished for civilization.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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