When I read the paper entitled How the FED Lost Control of the Money Supply I decided to offer it to you as one of my Special Knowledge posts.

Axel Merk, Manager of the Merk Hard Currency Fund, explains what has been "floating-up" all types of asset markets. The answer he proposes, and I agree with, is a massive flood of money and credit through Central Bank and Government auspices.

A few quotes from his paper may stimulate your curiosity to read about what I believe is a most critical dimension of our life today - Uncontrolled Money and Credit Supply:

"The world is awash in money. This money has flown into all asset classes, from stocks to bonds, from real estate to commodities."

"After the tech bubble burst in 2000, policy makers in the U.S. and Asia set a train in motion they have now lost control over. In an effort to preserve U.S. consumer spending, the Federal Reserve (Fed) lowered interest rates; the Administration lowered taxes; and Asian policymakers kept their currencies artificially weak to subsidize exports to American consumers."

(I agree but I also believe the policies after 2000 had a longer and richer heritage. They were enabled by the lack of any restraint on the creation of money and credit - In short, the virtually unlimited creation of irredeemable fiat money because there has been no restraint since the World's reserve currency - The US Dollar - after 1971 was no longer tied to Gold.)

"These policies have led to one of the longest booms in consumer spending ever – U.S. consumer growth has not been negative since the early 1990s. However, it was credit expansion, rather than increased purchasing power, that has fueled the growth."

"A massive source of money supply growth is purely of financial nature, ... What may seem like an abstract concept has propelled financial markets to the stratosphere."

"Two groups that have been most aggressive at taking advantage of this are hedge funds and the issuers of credit derivatives."

John Clayton Caris