Verlag Johannes Müller - Articles, Authors

Daily Bell: You also told us, "Today no university offers courses treating the gold basis, the gold cobasis and their interplay. They are silent on the apocalyptic threat of permanent gold backwardation." Can you expand on what you meant?

Antal Fekete: Here I am talking about the ominous and frightening parallel with the flight of gold into hiding in 476 A.D., the year when the Western Roman Empire collapsed − after centuries of monetary mismanagement, debasement diluting the gold and silver coins of the realm by adding base metals to the alloy. The result was a disastrous return to barter and the breakdown of law and order. Today the situation is analogous with the difference that we now have a concrete measure of the flight of gold: the gold basis. When permanent gold backwardation sets in (meaning that the basis has turned and stayed negative), it will mark the withdrawal of all offers to sell gold. Those who want it must get it through barter. This will kick off a contagion, spreading barter to all markets trading highly marketable commodities such as food, fodder and fuel. Not one university in the world is sounding the alarm that the collapse of civilization may be in the offing comparable to that experienced during the “Dark Ages.” The New Austrian School of Economics is the only place where one can learn about the negative gold basis, permanent backwardation of gold and the drowning of the world in hopeless barter.

Daily Bell: You told us that silver available for futures trading is dwindling and disappearing fast. "Permanent backwardation of silver is a matter of time, probably not a very long time." Where are we on the time curve?

Antal Fekete: That is hard to say. The interesting question to ask is whether gold or silver will be the first to go to permanent backwardation. Either event would trigger the other. You must watch both markets for early signs of budding permanent backwardation. I conjecture that probably silver will go first, but the evidence is circumstantial at best.

Daily Bell: You said: “The likely cause of the recent shake-out in the gold futures markets is not what you call ‘too high expectations’. Rather, it is Bernanke's belated recognition of the threat of permanent backwardation, and his attempt to 'scare the horses properly.' ”In simplest terms, what is the consequence of backwardization and why should Bernanke be worried about it?

Antal Fekete: The correct term is ‘permanent gold backwardation’. As I have indicated a moment ago, it would usher in barter economy that is grossly insufficient to serve the multifarious needs of our complex world trade. All kind of shortages would appear; famine, pestilence, unemployment would be rampant. Bernanke should be worried about it because it would mark the operation of a black hole with its irresistible pull, from which there is no escape. Bernanke should know, he has been there. He studied the black hole of the Great Depression sucking in the world economy in the 1930’s.