Fear of deflation lately has been convulsing world markets, causing liquidation of most assets into dollar cash and government bonds. Unchecked, that sort of thing must lead to the cessation of all industrial and agricultural production, and everybody freezes and starves.
Having triggered the deflationary collapse by stomping on the commodity markets a little too hard a few months ago, central banks now have desperately reversed their policies and are striving to revive prices by devaluing their currencies and inflating debt away with the "helicopter money" Federal Reserve Chairman Ben Bernanke long had promised to unleash.
Central banks have used gold in currency devaluation to avert deflation before, and the growing concentration -- near monopolization -- of the commercial short positions in gold and silver on the New York Commodities Exchange may be a clue that such a scheme is under way again. This growing concentration hints that the gold carry trade is over and that the gold and silver short positions are now almost completely in the hands of the U.S. government through its agent, JPMorganChase, and that the cost of the gold price manipulation -- what appears to be a controlled retreat with gold -- now can be borne entirely by the government with some of the magic money being contrived into existence.
The higher the gold price goes, the less real metal the government will have to produce on the Comex and the more the gold side of the reflationary policy can be sustained with magic money -- and, perhaps, the more suspicions of market manipulation will subside. But not, of course, with any help from GATA.
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.