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Sunday, September 15, 2013

The new liquidity Trap, part 2 realized: 2'300'000 CHF
Decadrachm, unsigned work of My(ron) and Poly(ainos) circa 409-406, AR 42.42 g. AKRAGAS   Of the highest rarity, less than ten specimens known. Undoubtedly one of the most  prestigious, important and fascinating Greek coins. A masterpiece of the  finest Classical style, work of two skilled master-engravers.

Since the "recovery" began five years ago, disposable income for the top 1 percent has increased by 40 percent.  For the rest, it is flat.  Factor in inflation, and 99 percent of the population is in worse condition than at the stock market low 5 years ago.

There is no official inflation.  Yet everyone in the 99 percent knows their dollars are worth much less than five years ago.  Rents have soared.  Education has soared.  Health Care costs have soared.  Eating out has soared.  Eating healthy food has soared.  Fuel has soared.

In other words, the world's most liquid market, the market for US dollars has somehow been manipulated downward, so that the notes in your wallet are losing value quickly.

This is the new liquidity trap.  The more liquid the market, the easier it is for the top one percent at the Big Banks, to manipulate it.

Stocks are at all time highs.  Because only the top one percent is participating in stocks.  They're waiting to suck everyone back in before they get out and let it collapse.  It won't collapse until the last widow and orphan gives up and gets in.

Gold is under huge pressure.  Because the top one percent is running it down, until every last little gold bug gives up their gold.  Once everyone is out, they'll buy bit all up and let it rise as stocks drop.

This is all done because Price Discovery which is the hallmark of Liquid Markets is terribly easy to manipulate when you are able to overwhelm liquidity with tremendous Volume.  This volume, enabled and backstopped by the Central Banks who literally create trillions out of thin air and give it to the traders at the Big Banks, turns Free Markets on the head.  The "Freer" in other words, the "More liquid" the easier to manipulate.

There are many who still don't believe all the liquid markets are manipulated suckers traps.  None of these true believers in the Free Market work at Wall Street Big Banks.  On Wall Street, they understand and revel in the rigged casinos we call markets.  You only need to have worked there a short while to understand this.

All those Patriotic True Believers in Free Markets make the Wall Street/Big Bank rigged casinos work.  As they happily lose all their worldly belongings, they look for scapegoats everywhere - immigrants, Jews, blacks, socialists, liberals - everyone but the Big Banks who are sucking them dry.

But the new Liquidity Trap has a flip side.  And it lies in the safety of illiquid markets for items with intrinsic value: coins, medals, antiquities, historical documents, art, gemstones, diamonds etc.

Ironically, it is very hard to systematically manipulate the price for items for which there is no price discovery.  You can pay a trillion dollars for an original  copy of the declaration if independence - if you can find one.  But there may not be a greater fool to pass it on to.  And that purchase tells you nothing about the price at which that document will next change hands.  All you've done is acquire the document.   The same is true to varying degrees for all unique items of intrinsic value.

So, if there is no price discovery, how are these items stores of value?

Because those who work at understanding these markets, those who know how many of each item might exist, how similar items are valued, where these items change hands, how these items change hands and how they are valued in comparison to other items of intrinsic value - can get  a pretty good idea of the reasonable range of value for any given item.

In other words Price Discovery is extraordinarily Knowledge Intensive, rather than Volume Intensive.  Therefor there is no advantage for the  Big Banks.  Yet there is a large Global Market for these items.

Take the Dekadrachm pictured above.  It sold recently for two and half million dollars?  Was this a fair price?  Will it hold its value?  I'd say yes.  What would you say?

Protect yourself.  Learn about these markets.

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