"There should in theory be some agency or law working to prevent this foreseeable nightmare from materializing. But it’s not clear that there is, and it’s also not exactly clear who has oversight. FTX is headquartered in the Bahamas. This scandal involves its international division, but the company also does business in the U.S."
Slate Magazine/blog on the FTX crypto debacle.
This could be written about any of the thousands of financial scams of the last several decades from AIG to ENRON to GE to Tyco to Worldcom to Maddof to Waste Management to Theranos to Lehman Brothers to Freddie Mac to MT Gox to Terra ETC ETC ETC
Crypto is a niche gambling vehicle. But AIG was the largest insurance company in America, It turns out they are equally difficult to vet for oversight agenies.
Oversight is near impossible because of the vast international nature of banking, shadow banking, and now Fintech Banking that makes following the money possible - but extremely labor intensive and time consuming for Oversight Agencies that are undermanned, underfunded, and staffed with people who in many cases were not smart enough to get jobs with Scamming Firms they're chasing.
The problem is magnified 1000 times by massive liquidity which is a compelling incentive for malinvestment from scams to plain old run of the mill stupidity.
Liquidity leads to inflation. Which leads eventually to the necessity to withdraw liquidity. And when the tide goes out, as Warren Buffet has quipped, you see who is swimming naked.
But, unfortunately not before they've taken billions and billions out of the pocket of unsuspecting "Investors" read GAMBLERS.
Investing is gambling unless you have a completely trasnparent access to information. Which in our current system nobody has.
Except, or course, with Commodities and Hard Assets.
Can a mining company or a food processing company lie about its numbers? Of course.
But when estimating wheat harvests and wheat demand or gold ounces mined per year and central bank purchases and sales or petroleum inputs, refining capacity and demand, figures are pretty transparent - or reaonably verifiable. At least enough to make compelling investment decisions as opposed to purerly throwing the dice and hoping for a result.
Because a Nation's food and energy supplies and currency stability and raw input needs for industry are vast and calculable. And though figures can always be manipulated, it's hard to say who would benefit from outright lies about these most important measures required for a nation's or industry's survival.
The same can be said for Hard Assets. For example, we don't know but we can calculate with some certainty how many Da Vinci paintings and drawings exist. And we know what the last one sold for. Or we know about how many gold Staters of Kroisos have come to market over the last twenty years, we can be pretty sure that most available for purvchase have come to market and we know what they sold for. More might by dug up in the future. But it's very doubtful that it would be in quantities that would appreciably affect current values. Especially with modern cultural heritage laws.
Of course there are fake coins, and there are plenty of schemes where unscrupulous galleries create a fake demand for more contemporary artists. But fake coins can be easily vetted and pump and dump galleries are only ripping off the extrarodinarily wealthy who fall for the scams voluntarily in order to feel socially validated. They easily could have chosen to invest in old master paintings that have been reasonably vetted.
The point being, that on the whole, in our current environment, "Investing" in fiancialization is really a form of gambling. Whereas, investing in Hard Assets and Commodities is a way of entering an investment arena where information is available, understandable, and easily vetted by the investor who takes the time and effort to do so
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