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http://www.24hgold.com/english/news-gold-silver-greenspan-has-taken-the-horse-to-the-water.aspx?article=485920366F8350&redirect=false&contributor=Antal+E.+Fekete

However, supply/demand is nothing but a figment of the imagination unless it includes speculative supply/demand which, rightly or wrongly, also participates in the price-discovery process. Speculators have no firm commitment to the long or the short side of the market. They may change sides at the drop of the hat, sometimes rationally, at other times not so rationally. Moreover, speculators can sell short, that is, sell commodities that they haven't got, nor do they know how they are going to get. Their motto is "sell now, worry later". The point is that speculation is capricious. Therefore the notion of supply/demand does not stand up to scientific scrutiny. It is an antiseptic concept having validity only in an environment free of the virus of speculation. Such an environment was approximated by the regime of the gold standard which successfully confined speculation to areas where it could do only good and no harm: to markets where supply was controlled by nature, not by man, such as markets in agricultural commodities. In these markets speculation is always stabilizing, and it makes sense to talk about supply/demand. But in markets where supply is controlled by man (read: government), speculation is necessarily destabilizing. Speculators risking their own funds can easily outsmart bureaucrats on salary, risking public funds. What are we to make of "supply" in the forex market where nimble speculators regularly forestall the central bank by selling forward before its agent can even pick up the telephone? Or what are we to make of "demand" in the bond market where nimble speculators regularly forestall the central bank by buying forward before its agent can even click on the "buy" button of his monitor? These hare-brained schemes of central-bank intervention in the markets are not serving any purpose beyond making speculation risk-free, thereby allowing speculators to tap into the public purse. One of the chief merits of the gold standard is that it is the only way to make it impossible for speculators to have a free ride at public expense.

Supply/demand is a deliberate oversimplification that may be applicable in fair weather, but is mercilessly blown away by the first storm. Under these circumstances an analysis of the Kondratiev long-wave cycle must be based on insight one can gain into the thinking of big-time speculators, and not on the spurious concept of supply/demand.

It is well-known that Greenspan&Co. does worry about deflation. In fact, they have made it clear that to combat deflation they can, and will, pump unlimited amounts of money into the economy, certainly by conventional means through open market purchases of bonds but, if need be, also by unconventional means such as through helicopter-drop of FR notes. Speculators are listening. While they do not take the helicopter-drop idea seriously, they are certain that for themmanna will fall from heaven in the form of risk-free speculative opportunity. They know that the Fed is going to buy bonds in the open market in an effort to combat deflation. All they have to do is to buy the bond before the Fed does. Why should they buy commodities, however attractive the idea may be? Scarcity or no scarcity, there is risk in buying commodities, namely the risk that you may be left holding the bag.