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Tuesday, July 5, 2011

Too big too see dept: The real conspiracies are all out in the open

The "Gold community" (or nuts who invest more than the industry proscribed 2-5 percent of their liquid assets in gold) is often accused of being full of "conspiracy nuts."

To "Gold bugs" markets are manipulated, governments are self-interested, and the banking system is corrupt. Can you imagine a more absurd world view?

How about the world view that dictates that those with the power to manipulate markets refrain from a sense of moral obligation; governments are primarily interested in the welfare of their constituents; and the banking system though imperfect is by and large an honest service industry devoted to the welfare of the public.

Which sounds crazier?

Now, I know that at this point it's tremendously tempting to put your pipe in your mouth, rub your chin, and calmly say "Well, my friend, the truth, as always, lies somewhere in the middle."

Really? You mean that those who are in a position to legally (in the sense that they will not ever be prosecuted) take advantage of the system only do so to some reasonable extent - all the while keeping the public welfare in mind. Is that any less crazy?

The fact is that most forms of market manipulation are perfectly legal: high frequency trading, market makers that trade their own book, self-dealing auctions, collusion between underwriters and analysts, collusion between funds and investment advisers and of course the government's own, Working Group on Financial Markets or the "Plunge Protection Team" whose job it is legally to manipulate the markets in any way they see fit.

The fact is that the Federal Reserve Bank of the United States is a private bank - owned by J.P. Morgan Bank and others - that has complete autonomous banking power, with no government oversight - and nothing it does can ever be examined or audited.

The fact is all the best scams are legal.

The fact is that the financial markets are so vast and complex that it has become impossible to regulate them. Nobody with half a brain goes into the regulation business which pays miserably. All the smart guys go into the manipulation business which pays handsomely. So most everything they do is technically legal - as long as the smartest lawyers in the world agree that they can get away with it - and if by some miracle they get called on it they can always argue rings around the imbeciles working for the government.

And what about the politicians that are supposed to be looking out for their constituents in all this? If you happen to see a lot of upstanding honest politicians out there - then good for you. There's not much I can say but - WHO? Obama? Bachman? Palin? Romney? Trump? Pelosi?

Which one of those guys is really interested in Public Service over Personal Power?

Or do you take the Middle View that those two things can sometimes be in alignment?

Which sounds crazier?

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