Dependency on derivatives

Noland:

"Importantly, the greater the growth and marketplace dependency on derivatives (hence dynamic/trend following trading strategies), the more mandatory it is for the Fed to oblige the marketplace with The Ultimate Big Government Stabilizer Guarantee of Liquid and Continuous Markets. Inherently, markets are fundamentally neither consistently liquid (always buyers willing to accommodate sellers) nor continuous (uninterrupted market pricing where trades are transacted with only minimal impact on prices). This remarkable marketplace subterfuge today plays a momentous role in fostering the ongoing massive Credit Inflation necessary to sustain a Ponzi Finance Credit System, one built upon an edifice of asset Bubble and leveraged speculation-based Debt Structures. To be sure, what has evolved is one of the most bastardized “market”-based systems imaginable."

Consider also Fekete's comments:

"It is no coincidence that the amount of outstanding contracts is so much larger than the amount of underlying assets, both in the case of gold and bond derivatives. The dynamics of the growth of the derivatives market is hardly spontaneous. Here is the reason why.

The government has the following desiderata:

(1) to have a floor below the bond price;
(2) to have a ceiling above the gold price.

Indeed, without such a floor and ceiling, the bluffing epitomized by check-kiting could be called, and the international monetary system would unravel."