Lies, Damn Lies and Rigged Markets

Cognitive Dissonance's picture

Lies, Damn Lies and Rigged Markets


Cognitive Dissonance



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It has been fascinating to watch Michael Lewis and the Flash Boys spread the shocking truth that the stock markets are rigged……rigged I tell you. One need only watch the video of author Michael Lewis’s, IEX’s Brad Katsuyama’s and BATS Global Markets President William O’Brien’s recent CNBC Wrestlemania 666 to witness the hilarity as certain vested interests, such as the mainstream financial media and the BATS exchange, defend the indefensible all in the pursuit of the almighty buck.

And who could forget the cheers erupting from the NYSE floor as each ‘point’ was scored. I could almost hear Howard Cosell calling the blow by blow on national pay-per-view TV. Down goes Frazier, down goes Frazier, down goes Frazier. One always knows the position one will take when our paycheck and/or livelihood depends upon our position. Though in some cases we can signal otherwise, such as the floor traders cheering the ‘news’ even though they feed off the same money teat.

I like to play a game with my fellow shoppers while walking the aisles of our local grocery store. Mrs. Cog, at times a reluctant, at times an enthusiastic participant, usually plays the straight man in the verbal exchange. We roll up to a spot and either Mrs. Cog or I will grab an item off the shelf, always near someone else who is shopping or possibly an employee who is stocking shelves, and express shock at the high price. In my very loud out-loud voice I will proclaim, “But honey, the government says there is no inflation” making sure the sarcasm is dripping off every word.

Almost always there is some type of reaction, be it verbal such as a snort, a sigh, a chuckle or outright laugh. Or maybe something more subtle, such as a shift in their body language, a tilt of the head, the sideways movement of the body or the shifting of weight from one foot to the other. I usually take any and all of these clues as a sign to engage them in some sort of conversation. Rarely are Mrs. Cog and I surprised by what we hear from our hooked fish. It is nearly universally agreed upon that of course there is inflation, lots of inflation, and naturally the government is lying about it. It seems that nearly all the people we talk to hold a view very different from that of the supreme monetary authorities. When venturing into other subjects we discover similar results.

So why then are we so surprised when we are ‘informed’ of something we already know? Clearly most participants in the stock market suspect something is very wrong, though they might not know exactly what. The average ‘investor’ who has not already removed themselves from the market ‘playing field’ still play the field with the hope they might pick up some profitable crumbs. Many veterans already ‘play’ the waves in the market when the big boys jump in and splash about; picking up leftovers and spillage from the trough when the pigs have had their fill, plucking dimes from in front of the steamroller.

The answer for this behavior is so simple that many will be outraged by the answer in the same manner the BATS Global Markets President William O’Brien was outraged that someone would yell fire in the burning movie theater before he could extract his last pound of IPO flesh. We all participate in the collective lies because we all perceive we have something to gain in not fighting the collective lie. And that something might just be to avoid scrutiny and stay under cover while the wolves circle the flock looking for the injured and newly aware to pick off for a snack or early supper.

Bottom line…the more dependent we are upon something, anything, the more likely we are to enable and support that ‘thing’ regardless of the fact that it might no longer be supporting us in the manner it previously did and might actually be killing us. Once this realization is fully denied, usually by never acknowledging its existence as it applies to us personally, we can then all go about our life laughing or mocking whatever ‘it’ is because ‘it’ is no longer, or never was, perceived as directly harmful to us.


Old School Den of Thieves


Thus the collective lie is seen for what it really is; a lie, while still being promoted and enabled by all of us as truth. When ‘the’ truth is finally spoken about the lie, we are all personally attacked because we enabled, no…we embodied the lie and thus we must all act in mock surprise and horror that we were lied to. The result is monumental hypocrisy by all parties involved, even the so called innocent bystanders and spectators, on par with the outrage expressed that there was actual gambling going on in Casablanca. The games people play.

This is how we all arrive at the theatre of the absurd, the CNBC Wrestlemania episode where everyone has a dog in the hunt and all are expressing their own conflicted point of view defined by their own set of standards and parameters. The apoplectic BATS O’Brien was in a near panic because someone with credibility had declared the market ‘rigged’. He was obsessed with the word ‘rigged’, as if to imply that any other word, such as damaged, faulty, glitchy, prone to errors, den of thieves, clusterf**k, anything would have been more acceptable than ‘rigged’. My God, to expose the market to be anything other than fair and balanced might just spook the sheep before they are fully fleeced.

There was the CNBC crew who, while anxiously trying to show they could remain impartial and ask reasonable and fair questions, were also as desperate as William O’Brien was to pull the wool back over the eyes of the un-sheared sheep. After all, if the markets were actually rigged where the hell has CNBC been all these years? Wasn’t their job supposed to be business reporters as opposed to what they have become, corporate PR repeaters and CON drum beaters? Sadly their credibility rested upon O’Brien’s shoulders and O’Brien was withering fast under the hot spot lights, spittle spouting from his Hollywood white teeth.

Then there was author Michael Lewis, who has single handedly slain many an ugly giant and was once again riding his prancing white horse to the rescue of us poor peons and wage slaves. Just buy the book Damnit, it’s all in there. While he pulls off in a convincing manner that he is genuinely and deeply concerned that the markets are rigged, something he didn’t fully understand until he researched the book, his mission now was to sell the book. Just buy the book Damnit. What I find so laughable is that the vast majority of people, including the people at Wrestlemania, have not read the damn book, yet everyone is arguing about its contents including me. Pure unadulterated absolute insanity.

Then we have IEX’s Brad Katsuyama, clearly scripted to be the ‘good’ guy here. After all he gave up a lucrative J.O.B. that paid him millions each year to win at playing the market. Don’t even think about losing in this rigged market when the algos know only one way…..up, for now at least. He left it all behind in order to strike out on his own and slay those big bad HFT algos.

Or at least to devise a work around, then gather capital and create his own exchange where those who want honest execution of their trades can bring their business to him. And doesn’t everyone want honest execution of their trades? Of course they do. Next problem…..carefully explain to EVERYONE that their trades aren’t being honestly executed where they presently trade. While he may be speaking truth, he was just as conflicted as everyone else in the room…..floor…..building……island.

While Brad also appeared sincere in his pronouncement that the markets were rigged, it was precisely this rigging that would enable his new exchange to be profitable. Without the general belief that the markets were rigged his exchange would be just like every other exchange out there. Actually it would be worse because his gizmo setup prevented him from charging the HFT crews for privileged access to front run the order flow if all else failed. Meaning that while he was calling the kettle black, his pot would not be the white knight if not for the black market. Be careful Brad, the FBI HFT investigation just might ruin your coming out party.


The Store Front Facade


I suppose the cheers and chuckles coming from the NYSE exchange floor peanut gallery during this wrestling match were the most hypocritical of the bunch on a multiple of fronts. Most market ‘insiders’ are now aware that the NYSE exchange ‘floor’ is about as relevant as teats on a bull and remains a fixture of the ‘market’ for the same reason banks still retain brick and mortar store fronts for the public.

The floor brokers are there solely to provide the illusion that humans are still riding shotgun over the HFT herd, thus maintaining some sort of CONfidence that the market is still ‘there’ and not actually residing in some random access memory chip in a server farm in East Whateverford, NJ. I always laugh when I see the NASDAQ ‘market’ site located in Times Square, NY. It reminds me of those flashing lights placed on computers in movies since the 50’s. They help you to think there is humanlike activity going on in there. The comparison to WOPR of WarGames is too close for my comfort. Shall we play a game?

The NYSE understands the value of human capital grazing the ‘trading’ floor where floor brokers hurriedly poke at hand held computer devices as if executing critical trades that might just be my 6 shares of IBM crossing the tape now. All the while the HFT algos have scalped them six ways to Sunday on every frigging execution. Those good ole boys down there know their days are numbered and anything that can stave off the culling of the floor herd until early retirement kicks in is AOK by them.

I guess you could say they are the most honest amongst the bunch. They know where their bread is buttered and it sure isn’t in a ‘market’ server farm providing so called ‘liquidity’ and a natural human pause in the middle of market insanity. In an admittedly imperfect market system of yesteryear, the floor brokers were there to push back on market runs and to be a buyer or seller of last resort when no one else would stand up. You know, true liquidity as opposed to the fantasy HFT liquidity that amounts to a mere drop in the bucket when it’s really needed.

That is so old school in this brave new world. So when they were cheering on the idiocy of BATS O’Brien they were cheering their own book and being honest about it. You’ve got to love old school greed and conflict of interest worn right out in the open and on your sleeve.  The buggy whip makers are pleading for a reprieve, or at least to be dealt back into the game for one more hand. And they might just get something out of this latest public ‘scandal’ unless the US government rushes in and throws a TARP over the entire mess under the cover of national security.

There are lies, there are damn lies and then there are rigged markets. I would suggest that there always were rigged markets….but at least it was Spy vs. Spy, human against human and the Earthlings had a fighting chance to steal with the best of them. Now with Artificial Intelligence (is it really artificial if it’s intelligent?) almost upon us we puny humans are just worried we might be dealt completely out of the hand. It’s the end of the world as we know it and I’m just fine. Cue the Terminating autonomous killer robots in 3……2…..1….



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DavidPierre's picture

Mr. and Mrs.Cog and the child unit @ their mountain hideout receive a few friends and visitors.

Goodbye World

(just a bit of hollywood fluff)

blindman's picture

no exit addicted to time,
then ....

blindman's picture

there seems to currently be a phase of integration
happening concerning the physical manifest perceived
by the individual in the perceived time realm(individual
perceived reality) and the cyber, virtual, speed of light,
digital, as represented by the interwebs faux cosmos or
altered conceptual domain. this integrations may be less
than seamless or full of seems or cracks and crevices and
faults, tremors and quakes. like on t.v. ....
perhaps the kind of disruption that results in mass extinction?
one thing that jumps out is this.
in the realm of the physical person the point of perspective
reveals the basic limitations of the natural world as in
a shovel or hammer at one hundred yards one experiences
as a visual image first and then a sound that corresponds.
not so in the virtual misconception domain; here there exists the
appearance of simultaneity
where there is none and it is of the creep of illusory propagandising
posing as foundational.
a temple and structure of sound architectural principle
is in order but not yet possible or conceived, that is my
anyway poems *tm

blindman's picture

check this one, a fine writing style full of content
and vituperative flourish.

Alan Simpson, the Senator from Wyoming calls senior citizens the Greediest Generation as he compared "Social Security " to a Milk Cow with 310 million teats. Here's a response in a letter from PATTY MYERS in Montana ... I think she is a little ticked off! She also tells it like it is!

"Hey Alan, let's get a few things straight!!!

1. As a career politician, you have been on the public dole (tit) for FIFTY YEARS.
2. I have been paying Social Security taxes for 48 YEARS (since I was 15 years old. I am now 63).
3. My Social Security payments, and those of millions of other Americans, were safely tucked away in an interest bearing account for decades until you political pukes decided to raid the account and give OUR money to a bunch of zero losers in return for votes, thus bankrupting the system and turning Social Security into a Ponzi scheme that would make Bernie Madoff proud.
4. Recently, just like Lucy & Charlie Brown, you and "your ilk" pulled the proverbial football away from millions of American seniors nearing retirement and moved the goalposts for full retirement from age 65 to age, 67. NOW, you and your "shill commission" are proposing to move the goalposts YET AGAIN.
5. I, and millions of other Americans, have been paying into Medicare from Day One, and now "you morons" propose to change the rules of the game. Why? Because "you idiots" mismanaged other parts of the economy to such an extent that you need to steal our money from Medicare to pay the bills.
6. I, and millions of other Americans, have been paying income taxes our entire lives, and now you propose to increase our taxes yet again. Why? Because you "incompetent bastards" spent our money so profligately that you just kept on spending even after you ran out of money. Now, you come to the American taxpayers and say you need more to pay off YOUR debt.

To add insult to injury, you label us "greedy" for calling "bullshit" to your incompetence.

Well, Captain Bullshit, I have a few questions for YOU:

1. How much money have you earned from the American taxpayers during your pathetic 50-year political career?

2. At what age did you retire from your pathetic political career, and how much are you receiving in annual retirement benefits from the American taxpayers?

3. How much do you pay for YOUR government provided health insurance?

4. What cuts in YOUR retirement and healthcare benefits are you proposing in your disgusting deficit reduction proposal, or as usual, have you exempted yourself and your political cronies?

It is you, Captain Bullshit, and your political co-conspirators called Congress who are the "greedy" ones. It is you and your fellow nutcase thieves who have bankrupted America and stolen the American dream from millions of loyal, patriotic taxpayers.And for what? Votes and your job and retirement security at our expense, you lunk-headed, leech.

That's right, sir. You and yours have bankrupted America for the sole purpose of advancing your pathetic, political careers. You know it, we know it, and you know that we know it.
And you can take that to the bank, you miserable son of a bitch.

P.S. And stop calling Social Security benefits "entitlements". WHAT AN INSULT!!!!

I have been paying in to the SS system for 45 years “It's my money”-give it back to me the way the system was designed and stop patting yourself on the back like you are being generous by doling out these monthly checks .

EVERYONE!! If you agree with what a Montana citizen, Patty Myers, says, please PASS IT ON!!!!

Rene-Paul's picture

Good read, had to take a break and let the chickens out. Lo and behold, watermelon seed that I planted and did not sprout last year ARE BACK! Separate Reality... indeed.



Philalethian's picture

It's been over a century of deceit:

This story should be highlighted again and again as it perfectly describes the pagentry of Geo-politics, the warmongering antics for the IMF/UN/WB profiteers, and population reductionists.:

Sorrow is watching the American people being prepared for the UN foreign troop takeover, while all the bantering and prognosticating continues about every darn distraction they can come up with. Jack McLamb described perfectly how the UN take over and American military draw down would go down. The whole carnival is about taking down America and killing off 95% of the American People.


DOGGONE's picture

Central, I think:
The Public Be Suckered

adr's picture

and the man who created the market did not know how to farm, or cook, or build, or fix. He had no skills of value to his fellow man so he thought of what he could do.

He decided he could help the farmer trade eggs for fence posts and nails. Of course his cut would be a dozen eggs for himself. Eventually this man was taking a cut from everyone in the village. He couldn't ever hope to use all that he had taken, so he began to store the surplus goods rather than give it back or to the other less fortunate people.

He thought of another service. Because he had a surplus he would sell futures on his stores. If the farmer wasn't able to supply the baker with enough flour, he would supply it. It was sold as a service, insurance as it were, just in case. This enabled him to take even more and create an even larger surplus. There were only a few instances when the farmer didn't have enough to supply the baker, and the drawdown in inventory was less than what the man stocked every month.

Soon the man who created the market was the most powerful man in town. He controlled all commerce and took his cut from everyone. Nothing could move without going through his hands first. His cut of the proceeds kept getting bigger for the people were afraid what would happen if there was a drought or crop failure and they couldn't take from the surplus stock.

One time a man asked the people in town why they had to give so much to the market. It wasn't fair he said, sure it was easy but the people could just go back to the way things were. He noticed every person in town seemed to be getting lees and less of what they made with each passing year. A few days later that man was run over by his plow. Some people wondered how he could have fallen in front of his plow, but they were distracted by the market man who threw a big party to celebrate a record level of grain stores.

One voice of dissent was too much for the man who created the market. If more people realized that he was really just a thief and held no skills of value. they might come after him. In a flash of evil brilliance he had another idea. He would sell shares of his stocks of goods. That way the people would think they owned a part of what he had taken. The brilliance is that in selling a share he would actually gain more of the town's property in exchange for something worthless.

He walked out the the street and proclaimed that in his benevolence he would allow everyone to own a part of his company. Saying if the people were afraid they would never get part of the goods, they could buy a share. As the store of goods grew, so would the value of the share. 10% of 10,000 bushels is more than 10% of 5000 bushels.

Oh the poor people ate it up, thinking they were receiving something of great value. Instead they were just giving more to the man who created the market. Eventually they were left with nothing at all and the man with no value, no skills, nothing at all had everything.

cougar_w's picture

Made me cry, you fucker.

DOGGONE's picture

Wonderful! Very wonderful!
For readers who might not find such collective gullibility credible, just look at these simple histories-to-date, that are nearly never shown, in our USA, right NOW:

Reaper's picture

This HFT "scandal"  is just another theatrical media performance to convince the suckers that the market is only rigged for making a very small percentage of each trade.  The suckers in the MSM theater now believe their White Knight has arrived and they are now protected.

"All the markets are a stage and all the unconnected are the patsies on it."

rsnoble's picture

Sounds like it's about time for the slaves to be blasted into the past somehow?

Fucking books.  Seems anyone.......even the flaming shitheads....can write a book and get paid out the ass.

I think i'm going to write a book but it would probably land me in a jail cell.

LawsofPhysics's picture

My god, stop overthinking this, when fraud is the status quo, possession is the law.  Get you tribe in order and redefine "wealth"...

Cognitive Dissonance's picture

Over thinking is my specialty. Bitching seems to be yours.

We are just like two peas in a pod. Come on, give me a smooch. You know you wanna. :)

LawsofPhysics's picture

Btiching?  looking at the comments it's pretty clear who has better things to do and who has time to "bitch".

cougar_w's picture

I'm pretty sure you used to have your shit wired up a little tighter than it has been for about a year now.

The bad guys are out there. Most of us in here are at worst fools, at best wandering prophets lost in the desert (or dessert, if one takes solace in food)

Me, I'm just insane so can be prudently ignored.

heh heh heh ...

blindman's picture

02 APRIL 2014
Moral Blindness Syndrome (MBS) - When Money and Confidence Dies It Will Be Televised
. "
"It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud.

The behaviour that caused the mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of this pattern, rather than some kind of economic accident."

Charles H. Ferguson

It is interesting to see the reaction that Michael Lewis has made with his new book, Flash Boys.

The furor is in large part over a quotable quote that is attributed to the book's major protagonist, 'the stock market is rigged.'

I am not going to get into the deficiencies of the book's moral argument, and the spin that is being put on this problem. It has finally become 'a problem' because the cheating that was going on started to visibly hurt the wrong people: the rich and well connected. " jca
jca posted and took down a wonderful post from 4/2/2014 that would be a fine link
right about here but ... alas, it was sadly removed.
in the sights is the dolla, the big one, the big fraud coming into view.

Cognitive Dissonance's picture

"I am not going to get into the deficiencies of the book's moral argument, and the spin that is being put on this problem. It has finally become 'a problem' because the cheating that was going on started to visibly hurt the wrong people: the rich and well connected. " jca"

Can't argue with that sentiment one bit. Everything that exists in the financial system is there for a reason. As soon as it hurts the 'wrong' people it will be removed, even it by doing so other pieces must fall to pave the way.

blindman's picture

i suspect it is the architecture to sustain the unsustainable,
justify the unjustifiable and perpetuate the license of the
sterile and morbid in leisure and comfort while the fools
get busy doing as told for the inability to figure out the
basic money scam and associated implications of 1913. the
money system created a "class" of interest seeking investors,
many with retired time on their hands and concerns for grand
children or drink. these, the ones making investment decisions
back in the days. did that work, predicated on the fraud
of 1913, slowly revealing itself in 1933, 1971?; then rockets
to space and satellites in orbit money images going virtual?
the "system" evolved by taking those investment decisions away
from the investors via the central banks sovereign usurpation
in conjunction and league with the armaments drones.
we are not in kansas anymore dotty. etc ..and so it gores ....
fascist oligarchs may have their brief moment in the light of day?
it won't last long if for no other reason than they are drawn to
self destruction like moth to a flame. just a guess ....
but time is an extremely elastic and inexact concept as it
intersects with common perception and experience.
crypto to deep space, onward .....
all built on naked aggression, nightmares, scattered glare and illusion
with a heavy dose of hydrocarbons and plastics, vacuum and injection
moldings pumping out products for industry and firing up people for
the mighty dolla, here a link to a tune from "kick me hard" ...
NRBQ - This Old House(album version)
if it is too loud you are too old so turn it up.
anyway, "it" is a sort of friday 'round here.

blindman's picture

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the Eternal God, I will rout you out."
- Andrew Jackson (1767-1845)

AdvancingTime's picture

To say the market is rigged is an understatement. After over 30 years of trading commodities I will flat out state without any reservations that lies and manipulation run rampant. If you think anyone is looking out for the small independent trader you are wrong.

An unholy alliance of the Federal Reserve, the government, and the too big to fail has left the rest of us in a precarious position. For the big boys, its insider information and computer trading, this includes computing patterns that exploit where stops are placed, this improves their ability to wash the weak out of their positions. More on this subject in the article below.

SamuelMaverick's picture

Somebody has to pay for the bankers and brokers mahogany lined offices, the benz's, and the country club memberships, the side piece of ass, the country house, the beach house, the two week cruises etc.

        What the fuck is wrong with everybody here, why don't you want to be ass raped a penny or so on every trade ??

         I remember an eye opening chart that showed the final amount of two different retirement accounts that had the exact same amount on money invested in them, the only difference was that one account was full of mutual funds and had extra management fees of about 2% more than the other account without fees. At retirement, the no fee account was 3 million, the account with 2 % fees was only 1 million.   That lousy 2 % was life changing for the retiree.  The pennies do add up.


Cognitive Dissonance's picture

One does not design a system of making markets and trading without building in advantages for those who make the markets. The system is corrupt, always has and always will be.

I remember reading something many years ago written by a former SEC commissioner. He basically said the same thing, then declared that government regulation was meant to keep it to a minimum. That was so old school. Now government regulation is meant to manipulate it to the government's advantage.

The SPY will be up on any day that ends in a 'y'.

weburke's picture

Dr. Ronald Pies, the editor-in-chief emeritus of the Psychiatric Times, laid the theory to rest in the July 11, 2011, issue of the Times with this staggering admission:      

In truth, the ‘chemical imbalance’ notion was always a kind of urban legend — never a theory seriously propounded by well-informed psychiatrists. In the past 30 years, I don’t believe I have ever heard a knowledgeable, well-trained psychiatrist make such a preposterous claim [about chemical imbalance in the brain], except perhaps to mock it…the ‘chemical imbalance’ image has been vigorously promoted by some pharmaceutical companies, often to the detriment of our patients’ understanding.”

Comte d'herblay's picture

The incidence of "biochemicals" being responsible for so many mental ills is indisputable by anyone who has felt the depths of depression for decades and miraculously been cured after two weeks on Cymblata or some such chemical from a pharma company. Permanently cured of this 'imbalance'.

Prozac is yet another that has helped hunnerts of milliiiiionns when taken properly.

Years ago I read a book about what the Pharma companies were working on in drugs to help alleviate depression, anxiety and other ills that were crippling the human race, or many members of it.

My father was once such patient, who surfaced from a ten yr bout of depression to spend his last 20 yrs in a relatively peaceful state of mind, no longer hamstrung by the oncoming debilitations of aging. After only 3 weeks he was able to resume living. 

I'm certain this story can be repeated a zillion times, of treatments with chemicals to restore serotonin 'normal' uptake levels, increase the speed of electro-chemical jumps and narrow the space between synapses that characterize so much of mental illnesses. 

Sorry but I have to disagree and side with big pharma on the new lives they have given to so many. 

Pies must have not bought shares in Lily or other companies that have made billions of well deserved profits for their contributions to better mental health.


giZmo's picture

The only reason they are just RECENTLY allowing the main stream media to report & slowly drip about the rigged stock markets is because we are getting closer to the next crash.

Cognitive Dissonance's picture

My thoughts exactly.

If the MSM is also 'rigged' then nothing happens by accident in the MSM. Just as the 'rigged' market was basically ignored for 4-5 years by nearly all MSM outlets, the fact that all MSM outlets are suddenly chomping at the bit over the 'rigged' markets is illuminating.

Bearwagon's picture

Okay, people, let me share a few thoughts with you, that might be a bit off-topic, but not really much. Maybe the two icefloats can make something out of it.

From a financial standpoint the amount of public debt in the "developed democracies" is an economical rag of the highest degree. In the "developed" nations there are two things, that are steadily increasing over time: On one hand the noticeable subsidies for corporations and direct transfers to households, and on the other hand the indiscernible revenue (indirect taxes and  the public debt).
The destinction between those two shines a light on the grotty tricks of the democratic politicians, which they utilize to conceal their dedicated and elaborate dissipation of money.
In fact it's quite simple: Subsidies are noticed immediately (by those who get them). Who gets money will notice it on arrival. But the nations revenues, like, say, taxes on food or increases in public borrowing, remain indiscernable. Those who are to foot the bill in the end, don't notice anything in the first instance. And that's exactly the reason why subsidies and other forms of transfer payments increase particularly right before elections, all the while the indiscernable revenues increase, too.
At this point it gets quite clear, that the political parties and the elected governments have ganged up on the general populace. It cannot be otherwise explained, that the noticable expenses are steadily rising (over decades), because politicians want to win elections, while they are being financed by means of indiscernable revenues (preferrably public  borrowing).
That is blank and blatant misuse of power for the own benefit, to the harm and at the cost of the general populace.
By acting in such short-winded ways the politicians not just create simple botch. That would be somewhat affecting. To err is human, and so is to mess things up.
But this policy is systematically, reflected and dastardly doing harm which costs sum up to several billions. It has brought complete nations to the brink of ruin, and it will ruin them in the end, if no one will prevent that.
It may be the case, that some political representants still believe they are advocators of the public weal and are servicing it.  In fact they are damaging the populace and do not care the slightest bit about the concerns and needs of the people. They know exactly with whom's money the can propagate their own benefit. They are parasites of the populace, which they allegedly represent so glorious and honest.
That's shown (not only, but also) by the absolutely irresponsible public debt in nearly all "developed democracies". The democratically elected representants have become the deadliest vermin for their nations. Not just because they are evil characters. (That isn't even remotely the point.)
It is a fundamental, structural problem of representative democracies. That system invites the politicians to solve each and every problem at the cost of the populace. And so they do. That way, they are well off, as long as the populace is willing to be treated like that.  And the populace is willing ... regrettably.
James Buchanan proposes: "Don't expect politicians to behave differently. They behave according to their interests." [Interview with James Buchanan: ]
But in the realms of bureaucracy and politics the benefit isn't just money, it's also power, being reelected, cheering MSM, sinecures, the number of inferiors and last but never least a heightened budget. And because the government is by far less efficient than the economy and the "markets", the failure of government is a much greater problem than any "market"-failure.
The logic of such a policy leads to ever increasing public expenditure. Driven by their goal of reelection, politicians inflate the national budget endlessly. They are fixated on their own power and oriented solely at their self-interest. To get elected they are haphazardly distributing tax reductions as giveaways. Just as the late Milton Friedman once wrote (Milton and Rose Friedman, "Free To Choose", 1980): "The only way to change the behaviour of politicians, is, to take the money from them."
He was not exactly right. Even completely empty checkouts don't impress todays politicians notably.
The theory of public choice regards the behaviour of politicians and officials as the result of an addition of the choices of individuals maximizing their own benefits. Officials try to rise their budgets, politicians try to rise the number of votes they get.
So, for the officials, the efficient supply of the populace with public goods and services is at best a secondary concern, first and most important is a high "output". Only that way they can hope to further inflate their budget, and they need it inflated, because that's necessary to pursue their own personal goals, like power, revenue, prestige and promotions. If officials would succeed in optimizing organisational structures or save on some processes, they would get a smaller budget in the next planning period. That's unacceptable! So they won't touch that with pliers.
Politicians find themselves confrontated with much the same issues, because the people would have to bear ample costs for information about and control of their politicians, if they wanted to control them at all. Polticians exploit the latitude, which is caused by a void of control, to pursue their own concerns and maximize their personal benefit.
From such a perspective, the state is just a power- and cash-hungry, insatiable monster. It's politicians maximize their power with the money they ripped the populace off, and at the same time have to court the special groups, that can make sure they get reelected. So they create wholes for their cronies, and rise the taxes elsewhere, to pay for it.
"The key to Public Choice [...] is common sense. And common sense tells you that a politician is very much like the rest of us. A politician who's seeking office or seeking to remain in office is responsible, as he should be, to constituents. He wants to go back to a constituency and tell them that he's either lowered their taxes, or he's brought them program benefits. You plug that into politics and you have a natural proclivity of a politician to create deficits. "  James Buchanan (see above)
So, deficits are the rule, while it is hard to accomplish, to create profits in times of economic upturn. That's no exaggeration, as one can plainly see if you look at the policies of each and any "developed democracy" anywhere in the world.
In a free "market" environment a buyer can know quite well, what he's up to, if he buys something. But in the "political market" the "buyer" doesn't know what awaits him, because he just buys himself a "service" from a politician, from whom no accountability can be demanded. That's a reason why political competition is not comparable to economic competition in a "market".
One can have all the best intentions - it won't do any good. The public deficit has risen over decades in all democratic nations, regardless of which evil or good, left- or rightwing, lavish or thrifty , liberal or conservative, smart or dumb president or other head of government reigned. The public deficit is rising under all circumstances, no matter who or what is governing.
In the spring of 2012 the whole world was indebted to an amount of roughly $ 45 trillion. The 15 nations with the highest debt-load alone accounting for $ 35 trilion of that. Now, in spring of 2014, the worlds debt has risen to nearly $ 53 trillion, and the same nations account for more than $ 39 trillion of that total.
These nations are without exception developed representative democracies. Just look here, to get a very clear picture of the situation:
The most highly indebted nations are all developed democracies: North America, Western Europe, Japan, Australia ... the measly $ 13 trillion that are left are dispensed among 185 other nations. All is well, there. They are in the green.
Those experiences from many democratic nations teach us something about institutions:
.) The short-winded political opportunity trumps longterm rationality nearly everytime. Politicians are rapidly delightening the populace - and not much else. Their outcomes are not sustainable and seriously harmful in the long run.
.) Theoretically and empirically well founded hints from professional economists can just be ignored by politicians, if they don't perfectly fit their own agenda.  The knowledge of experts can be ignored without explanation, even if the experts all agree.
.) Politicians will find holes and backdoors in each and every borrowing rules (without which the public deficits probably would be even greater). That's mainly because it were them, who passed that law decidedly formulated in a way, which would allow them to do exactly that. If that won't suffice, they simply change the law to make it fit.
So, with slightly other words: The main reasons of the public debt are embedded in the fundamental structures of power and stimulus in the political system of the "developed democracies". It is a systematic failure. And such systematic failures cannot be overcome by good intentions. To get rid of them, we have to alter the whole system.

Rigged-markets my ass - that's not our only problem, and it ain't even one of the more serious.

Cognitive Dissonance's picture

"Maybe the two icefloats can make something out of it."

Don't make me post images of polar bears sun bathing on icefloats buster. :)

Don't forget to turn over every half hour

Mrs. Cog's picture

You made me pinkie swear when we decided on the whole Two Ice Floes theme to never ever post Polar Bears or Penguins. Remember? And yet here we are...

Cognitive Dissonance's picture

I said never post those images on Two Ice Floes honey bunny.

Anything goes on ZH. :-)

ebworthen's picture

"All the world's a stage."

Trades should be made with this:

(link opens in new window/tab)

ebworthen's picture

Thanks Cog, enjoyed the article.

TaxSlave's picture

Might have meant this (sorry for being tedious)  


Ah crap I don't know how to get it to grab the image.

cougar_w's picture

No that still works.

Before there with CRT terminals or punched 80-col cards, they used to program minicomputers via toggle switches set in a row on the front panel. You set the toggles to the binary code and data you wanted, and made it load that into a register of the computer. Clear and repeat, for as many lines of code or data as you had. Took days to load a program of any complexity. You could still construct a digital Buy or Sell packet in the same way using a row of blade switches, then push it out onto the wire (even more effort) but the entire process would take hours. With all the hub-bub about high-speed digital trading it's amusing to think about what is really going on; it's a row of blade switches being set and cleared very very very very very very very very fast.

ebworthen's picture

Worked for me, and not a bad idea - trades sent with morse code - that would at least be a limitation.

I meant the double pole switch so you would have to physically flip it 180 degrees to activate a trade.

Use your whiz-bang computer to set up the parameters and view graphs, but to execute a buy or a sell you have to physically move this switch from one side to the other.  ;-)

basho's picture

nicely written, but it's all been said before almost ad nauseum. so why say it all over again and again and ...

Cognitive Dissonance's picture

" why say it all over again and again and ..."

Because BATS O'Brien is a big meany and beat up on nice Brad. :-)

<I just love daytime soap operas.>

chindit13's picture

Since a portion of both the country and the media are suddenly focused on unfairness in the capital markets, perhaps it is a good time to ask why Nancy Pelosi was allocated shares in at least eight IPOs in the late 1990s, and was able to dump them on the first day of trading for big gains.  Of course the real reason is known, but I would enjoy seeing the squirming as the underwriters fabricated the ostensible reason.

Then we can ask how Harry Reid went from near foreclosure in 1998 to a net worth in excess of $7 million today, when his after tax Congressional salary combined over those years is less than $2 million.  There's probably around 533 additional questions that need asking.

If our elected officials are so skilled in the handling of money, one wonders why the deficit is such a disaster.

Cognitive Dissonance's picture

You mean several politicians are corrupt? There ought to be a law against that. :)

Seriously though, the only reason there are two political parties in the USA is to create the illusion of choice. It is the Democrat's turn to dip their beaks deep into the feeding trough. They do it regardless of the administration, but the beak goes in just a little bit deeper when their man (or women) is in the oval office.

The Republicans are waiting in the wings for their turn.

fonzannoon's picture

I think when you really dig into this issue it transcends everything. I can list my house for sale by owner. But the majority of people still pay 4% plus to a real estate agent. For what? Give it a few years, there will be no real estate agents pictures on your shopping cart.

Look at what Tesla is attempting. Eliminate the dealer and have the public buy directly from from the distributor. Because when the hell was the last time a car salesman was useful? Goodbye

We are living through a period where as the depression continues to deepen, the golden age jobs of the middle class will continue to be shed in a massive way. Give the University system a few more years and many colleges will be just as empty as your Barnes and Nobles and radio shack. It will all be done online. As for the mini cities that sprung up around these college towns, goodbye. 

Expect a whole lot moar of this.

It's the way everything is going. As for the markets, the Bernak has made it clear that the index (almighty spy) will only go one way. Whether you want to frolic in the nice warm pool that is the index, or swim out in the ocean with the big bad sharks (stawks) is up to you.

adr's picture

Tesla isn't trying to eliminate the dealer for the benefit of the customer, but for the benefit of Elon Musk. There are a lot of car dealers near me that pay the salesmen salaries instead of commission. One of my friends gets a base salary of $45k plus bonuses. He also gets a dealer car to drive saving him a few hundred bucks a month. I can't believe some people actually think eliminating the dealers would lower car prices. The car price would stay the same and Ford etc would take the extra margin to pump their balance sheet and hopefully cause their stock to rise. Buying a car would become a worse experience than buying a TV at Best Buy. Corporate showrooms would be filled with unknowledgeable idiots getting paid near minimum wage and there would be no negotiation.

At least the car dealers are local businesses that pay taxes to the towns they are located. They sponsor little league teams, run car shows, etc. I know a few snake car salesmen, but I also know a few great ones. One of my local used car lots has a policy where he puts a car on the lot for 15% more than he paid for it. He'll let a car go for 10%. What that means is sometimes the car isn't a great deal and sometimes you'll see a car priced a few thousand dollars below the price you'd see on another lot.

I'd take a local owned car dealer over the corporate showroom of a 900X overvalued shit company selling an unsafe electric car any day.

malek's picture

Sorry CD, but I am somewhat disconcerted by some leaning in your article.

Sure Brad Katsuyama has his own set of motives, but that does that put him on the same level like all the other hypocrites.
If anything one could wonder why he didn't come up faster with his "solution" - there are scenarios imaginable where he plays the useful idiot (knowingly or unknowingly) to belatedly offer a fix, for the whole financial sector to save at least some face.
On the other side you must allow for the fact that something new needs PR to have a chance against established systems.

In general I am still waiting for the first person to bring up the central question:
Assuming the IEX is not rigged because of their "fiber spool" delay for all participants, how do we know and can verify that is the case and will still be tomorrow?

As one cannot prove non-existence, I doubt that is possible to verify.
And therefore that is not a real market-based solution, as a true market needs observable actions of competing entities.

Cognitive Dissonance's picture

I agree that Brad appears to be the cleanest dirty shirt in the laundry basket. But he has much to gain by proclaiming the market is rigged. And as I pointed out in the article, he has much to gain if the markets remain rigged.

I was trying to show that everyone in the discussion, as well as in the peanut gallery, had conflicts of interest.......including dear Brad.