Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Rise of the Paper Machines

Stock-Markets / Fiat Currency Apr 20, 2015 - 03:14 PM GMT

By: DeviantInvestor


Since 2011 the financial markets have been dominated by rises in paper markets and declines in commodity markets.

Group One Paper Examples:  T-Bonds, US Dollar Index, S&P 500 Index

Group Two Commodity Examples:  Crude Oil, Sugar, Wheat, Gold, Silver

Group One markets are “paper” markets in fiat debt, fiat currency, and paper equities.  They are heavily influenced by “money printing,” Quantitative Easing, High-Frequency-Trading, futures, central banks, and political agendas.

Group Two markets are supposedly more real commodity markets, but they are also influenced by futures trading, HFT, and other agendas.

Examine Group One charts – quarterly charts for 30 years showing only the quarterly close lines.


Examine Group Two charts – quarterly charts for 30 years showing only the quarterly close lines.

Clearly the paper markets in Group One have done well, while Group Two markets have been hurt.

Group One markets have what in common?  They are supported by central banks, governments and politicians who fear deflationary forces.  Deflation is difficult to control, destroys debt instruments (the lifeblood of banking), reduces tax revenue (lifeblood of governments), and makes it more difficult to “buy votes” (lifeblood of politicians).  Deflationary forces are fought with “stimulus,” more spending, more debt, Quantitative Easing, bond monetization, Zero Interest Rate Policy (ZIRP), dodgy government statistics, and propaganda.

In my opinion, the financial and political elite have done a good job force feeding created currencies into the paper markets of Group One, thereby levitating them for the benefit of bankers, politicians, and the financial and political elite.

Similarly, the gold and silver markets are often viewed as an early warning of inflationary forces, excessive “money printing” and political and financial mismanagement.  Hence gold and silver prices must be suppressed, particularly after the scare that gold and silver gave the powers-that-be in 2011 when gold surged to a new all-time high.  Since 2011 the created liquidity has been injected into the paper markets at the expense of commodity markets such as crude oil, sugar, wheat, gold, and silver.

The powers-that-be have done a great job levitating Group One markets and suppressing Group Two markets.  They have considerable resources, massive quantities of fiat currency, considerable influence over the media and government statistics, and the power of the banking cartel and “printing press” behind them.  They possess the motive, means and opportunity, so there should be no surprise at their success levitating Group One markets.

But really, how long can fiat paper markets be levitated?  There are signs of strain everywhere:

  • Swiss sovereign debt out to 10 years “pays” negative interest.
  • German sovereign debt out to 8 years “pays” negative interest.
  • US T-Bonds had a 3+ sigma move, based on monthly closes, from February 28 to March 31.
  • The US dollar index has risen to a 12 year high.
  • The S&P reached an all-time high in March 2015 and is within a percent of that high as of April 10.

These beg the following questions:

  • If sovereign debt is increased every year and is never liquidated because it is continually “rolled over,” how much is that debt truly worth and how long will perpetually increasing debt persist before a violent reset occurs?
  • If currencies (euros, yen, pounds, and dollars) are created by the trillions each year, thereby diluting the existing stock of currency in circulation, how rapidly will purchasing power diminish?
  • Unbacked fiat currencies have eventually been inflated into worthlessness, so when should we expect the demise of euros, yen, pounds, and dollars? Is a “currency crisis” in our future? 
  • If sovereign debt has a negative yield, what rational person would “lend” money to an irresponsible government when the government guarantees the return of only a fraction of the loan in currency units that will be devalued and worth considerably less when/if the loan is repaid?
  • If governments and central banks are intensely working to levitate bonds, fiat currencies, and stock markets, and are working equally intensely to suppress commodity prices, what do they have to hide?
  • Are gold and silver purchases more sensible than investing in overpriced paper debts that guarantee a negative yield in a devaluing currency issued by a dodgy government or central bank?

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2015 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor Archive

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in