an extraordinary interview with Prof. Antal Fekete, founder of the New Austrian School of Economics.
Given the depth and importance of the issues presented here, this blog will devote the necessary space to discuss them, as their ideas give sustenance from the academy, to which some of the most seasoned investors and journalists, watch and comment on your daily activity.
From the outset, for example, the much-discussed decline in the gold price
Fekete believes this, the price of the metal goes to the “extinction.” not believe that gold prices go toward five digits, or in any case, considered that before that happens, the “backwardation” permanent its market will be closed “all futures markets.” A disaster, of course.
What is “backwardation”
? It is the market condition that occurs when the “Gold Base
“, is negative. In very simple terms, the “Base” is the difference between the contract price of the nearest future and in Full Metal. If it is positive, it would be normal, the condition is in “contango”
, and the opposite, where we are now,“backwardation”
, chairman of the U.S. Federal Reserve
, never imagined that billions of dollars being printed every month, would go to buy the metal, making the “Gold Base” ( gold basis
) is sink deeper, the tendency of pushing the“backwardation” to become permanent
. A sure sign that the availability of spot gold
Of course, there is that gold is ending, but each day their holders are less likely to part with it, to supply the market. This, even before the real possibility of risk-free profits, as being in “backwardation”
, can sell their physical gold and at the same instant, buy a futures contract
that is the reset for later delivery, at a price low.
A permanent and growing negative base therefore indicates that investors in gold despise this tempting offer, to the increased risk that the promise of delivery, remains in that. Such is the collapse of the futures market that either warns Fekete .
Once this happens, gold can not be bought at any price, and would be available only through barter (direct exchange)-the last resort during deflation, which would result in the collapse of the global monetary system. This will jettison the old myth that gold is only attractive in times of high inflation expectation.
This possible scenario has been dismissed by most economists, who see what is in front of his eyes: “the biggest economic contraction” of history, as called.
Fekete is blunt: Keynesians and monetarists are missing the difference between ordinary commodity and monetary commodity (gold and silver), and thus made a grave mistake .
, in “On the Origins of Money” ,
explains the preference of people in their interaction, by means of exchange selected as generally most liquid commodities, or what is the same, to those whose marginal utility
decreases lowest rate of all, what makes them unique and distinct monetary precious metals.
In other words, the appetite for gold and silver to anyone, almost limitless in quantity, as if eg for wheat or corn, just their ability to be liquidated (exchanged) for just about anything you want at any time, even as far as years, decades or beyond, because you can treasure. These qualities made them money.
Fekete says that for this reason, the gold does not obey the law of supply and demand, it may be that a higher price does not bring with it greater supply.Moreover, sometimes it causes decrease-by the reluctance of the “strong hands” to get rid of it, and not only that, but the threat of price “gold” role plummet in time to scare away investors, induces them to increase demand for physical delivery of the metal, as is happening.
So, beyond the observation of gold price is much more important to track your Base
(Future – Cash
), his COBASE
(Spot – Futures) and their interaction, we reveal how close we are to the permanent phase of “backwardation”.
Fekete thinks Bernanke has awakened to the dangers involved, and therefore would be trying to stop the state of “backwardation”, while closely smells the worst of all nightmares, deflation.
The route is the same as always: to attack gold prices selling unlimited amounts of futures through their “puppets”, as referred to Bullion Banks (banks specializing in precious metals). Sure, we insist, scare away investors as desired, generates the opposite effect. The chart below speaks for itself.
This leads us to think about the real possibility that, in the more or less near future, a major new gold market attack occurs. Everything depends on the behavior of the base and the COBASE.
The following chart (courtesy of monetary-metals.com
) is overwhelming.Handlers tried to take the gold COBASE territory positive ( backwardation
), and succeeded momentarily, from the +0.18% on 12 April, to -0.08% on day 16, just after the crashes of 12 and 15.
However, the victory was Pyrrhic, and besides, the COBASE (red line. In Blue “Base”) almost immediately increased +0.26% by May 1. The next time, need an “artillery” heavier.
Anyway, the fact is that each time the attacks will be less effective, and the apocalyptic scenario proposed by Fekete, will be closer.