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Are markets really bigger than governments? Don't count on it

Section: Daily Dispatches

10:45p ET Sunday, March 1, 2015

Dear Friend of GATA and Gold:

Swiss gold fund manager Egon von Greyerz tonight tells King World News that hyperinflation has begun to take hold in especially troubled nations and will take hold in Europe and the United States as Western central banks resort to negative interest rates to support asset prices.

Von Greyerz also predicts that market forces will overwhelm manipulation of markets by governments. "Over time," he says, "markets are bigger than any government or group of governments."

Your secretary/treasurer hopes so but isn't sure of that.

For markets are certainly not bigger than totalitarian governments that are ready to suppress them by force, as the Nazi regime in Germany did as World War II went against it in early 1943. As is recounted in the history of the Berlin Boerse --

-- "On 13 February 1943 exchange trading with continuous quotation comes to a halt. Shortly afterward a government act rules that the Reichswirtschaftsminister will be responsible for fixing the prices for securities. The exchange thus loses its economic significance. It stays open in this amputated form until 18 May 1945."

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If the Nazis had invented not just the V-2 rocket, the Tiger tank, and the jet fighter plane but also high-frequency trading and derivatives, they might have sustained the illusion of "continuous quotation" on the Berlin Boerse even after the leveling of Berlin. Hell, with HFT and derivatives they might have won the war.

Of course markets were defeated for more than 70 years by communism in the Soviet Union. ("We pretend to work," Russians said sardonically about their system, "and they pretend to pay us.")

During World War II even the government of the United States, the country that had boasted the world's strongest market system, took control of most major markets by rigging interest rates and imposing rationing and wage and price controls. Even now, though the shooting wars under way are isolated, Western central banks are openly engaging in "financial repression" with interest rates and surreptitiously engaging in "financial repression" with the monetary metals, and even respectable people are talking about the possibility of capital controls, another mechanism for destroying markets.

Indeed, at GATA's Washington conference eight years ago central bank intervention was already so obvious that a mere high school graduate noted that "the main purpose of central banking now is to prevent ordinary markets from happening at all":

That is, these days "Reichswirtschaftsminister" might as well translate to "executive vice president for market operations of the Federal Reserve Bank of New York."

If the law criminalizes markets or authorizes the government to rig them -- as law in the United States long has done, as with the Gold Reserve Act of 1934, the Trading with the Enemy Act of 1917, and the International Emergency Economic Powers Act of 1977 -- and if this official market rigging is upheld by the courts and enforced by the police and the military, just how are markets supposed to reassert themselves?

Could markets ever reassert themselves in Western welfare states where about half the population now receives some form of transfer payments or income support from the government? Is there still any constituency in those countries for the free markets that made Western civilization superior? Or would free markets threaten too many established interests where so many people are ready to settle for central planning by an unelected elite in the hope of a stultifying security?

Your secretary/treasurer doesn't know. He thinks that the best that can be hoped for is just that, hastened by clamor like GATA's, the market riggers can be forced to show their hand -- forced to do their rigging in the open, with guns drawn -- as surreptitious rigging, rigging that seeks to deceive mere traders, increasingly fails and produces shortages (commodities whose prices have been suppressed below the cost of production) and idle surpluses (government bonds that only central banks will buy).

Of course such circumstances have developed already. But when the guns are drawn at last maybe even the Financial Times will have to take notice.

Von Greyerz's interview is excerpted at the King World News blog here:

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

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