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Must read: The story of market fall

By Gary Dorsch
The big-3 central banks and their finance ministries still have the ability to jawbone foreign exchange rates, or if necessary, execute outright intervention to battle with speculators. However, the most shocking development in the global markets over the past few years was the natural evolution of a worldwide de-facto gold standard that is just starting to impose discipline upon abusive central bankers.

In other words, brazen attempts by central bankers to inflate their equity markets by pumping up their money supply, has been matched by higher gold prices. For instance, the emergence of the gold vigilantes in Europe became evident in September 2005, when the price of gold rose above a four year resistance area of 350 Euros per ounce, and zoomed to as high as 570 Euros on May 11th, 2006.
Interestingly enough, the gold market closely attached itself to the monetized EuroStoxx index, and then outpaced the EuroStoxx to the upside. In other words, the impressive EuroStoxx-600 rally was just an optical illusion in hard money terms, and was more reflective of the ECB’s ultra-easy money policy.....
To prevent strong loan demand from lifting the cost of money, the ECB inflated the M3 money supply, and in the process, also inflated the EuroStoxx-600 market and watched the price of gold soar 74% from 316 Euros to as high as 570 Euros /oz. Although both asset markets rose in tandem to profit from monetary inflation, the EuroStoxx-600 index lost 26% to the price of gold since September 2005.
:) Falkor

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