11178528714_3e51448763_cFor years, the handwriting has been on the wall that the manipulation of economies and markets could not last.  Yet it did, continuing to surprise and amaze investors and observers as the immense power of the central banks was mobilized and deployed to prevent markets from seeking natural levels….

Looking back, the seeds for the bitter fruit we are about to taste were sown in the mid-1960s with the passage of the Coinage Act and the decision to conduct the Vietnam War and the “Great Society” simultaneously without fully funding either.  The 1970s showed the implications of the uncontrolled spending with the emergence of high levels of inflation and interest rates as well as the decline of the once-mighty dollar against the “hard currencies” of the time, the yen, Deutschmark, and the Swiss franc. A long list of financial and economic firewalls such as the Glass-Steagall Act had been put in place since the 1930s to control the ruinous speculation seen during the ‘20s.  Once President Nixon closed the “Gold Window” in 1971, the Pandora’s box of unrestrained credit and fiat money creation took center stage.  The ability to fund the various programs and deficits with seemingly cost-free money resulted in turbulence in the financial markets within a few years. MORE