What still glitters

After seeing the carnage in the gold market, I decided there is something more going on than routine private market price manipulation. Private manipulation can move the market two or three perent at a time, but this kind of massive collapse requires government cooperation. The facts that I have pieced together (some significant, others not as much):

• Central banks have been net buyers of gold, the most significant piece of the market right now. China mines more than the rest of us combined, keeps every ounce, and is still the largest buyer on the world market.
• These same central banks have a need to obfuscate the future inflation they've been producing through their unprecedented money printing.
• By owning the lion's share of gold, they will essentially control price. By manipulating the price, they can continue to sweep the early emerging inflation news under the rug.
• The best way to own all the gold is to convince the current holders of gold that there is a looming deflation coming.
• This is an easy argument to make, because the central banks have been printing money all along, and yet the velocity of money remains at historic lows. This money is created, but not yet distributed. It is sitting in reserves waiting for some trigger event.
• By nurturing the myth of deflation, the inflation brew they've concocted stays in the back room, ready to boil over, but not just yet.
• Before that happens, the more gold the governments hold, the better positioned they will be to manipulate economies when inflation does hit.

Not everything has to be a conspiracy theory, but do we have any reason to not to believe this is crony capitalism at work?  There are a lot of important people (mostly politicians) who need the price of gold to remain low, 1) so they can acquire as much of it as possible before the currencies collapse. And 2) so they can continue to monetize the debt through stealth and overt inflation. Since they are masters of disinformation, they'll be able to accomplish this largely at the expense of the individual investors. This is the modern equivalent of Executive Order 6102.

Meanwhile, they are feeding the "ministry of information" the line that:

The economy is improving, and the fear quotient in the gold market is wringing out.

India's tax on gold is going from 4% to 6%.

Cyprus is selling $400 million dollars worth to pay the bills.

These are part of the disinformation campaign, and are laughable as explanations for yesterday's market moves.

Now, it is possible, on the other hand, that we really are headed for a raging deflation. If that's the case, then everybody should want to be in cash right now. What people fail to realize is that the govenment's reaction to deflation is always going to be even more inflation. So, gold should be the last asset someone should want to turn into cash right now.

People who think that gold is a bubble will feel vindicated (they will say they were right in 2013), but they haven't seen anything yet. The real bubble is the dollar.