I don't believe CB's have been "propping up gold" if anything there is evidence to the contrary. When an inflationary measure has surged,IMO, it's natural for CBs to want to maintain the status quo, rather than permit the asset to create the perception of deflation.
First they are threatened by the massive run up in Gold, as it suggests hyper-inflation.. Then they get frightened by it's collapse, because that creates the impression of Deflation, a far worse demon to the Bankster's than inflation. They don't mind prices going up at a reasonable rate of inflation.. But they seldom want to see those prices go down..
I've been working on a analogy for monetary and economic systems.... IMO, any economic system represents a leaking tire, the leak representing destruction of capital and defaulted debt, or some other "deflationary" cause.... Regardless, every economy "leaks"...
The question is whether there is more air being pumped in, than is being leaked out at any given time. Inflation versus Deflation..
But when the economic "leak" in the tire blows out and widens, the question is whether the airpump (cheap and easy credit) can pump hard enough to keep the tire from leaking, or the actual leak hole, becoming even larger...
So right now, at $85 Billion per month in QE asset buybacks, the Fed may be finding that deflationary pressures, such as what appears to be occurring in China now, may over-tax the capacity of their "money pump"...
Or.... Will it lead to a flight of capital to the US that boosts Bond and Asset purchases and takes the pressure off the Fed??
This remains to be seen.. But at some point we need to see deflation in order to restore purchasing power to the consuming public.
Hawk |
