We've Habituated To A Rigged, Fraudulent Market

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Fraud generates risk, and risk eventually breaks out in the "safest" parts of the financial plumbing, the ones nobody gives a second thought to because they're "low risk."

Let's go all the way back to the last time a central banker actually spoke the truth in public: December 5, 1996, 18 long years ago. It was on that day that Federal Reserve Chair Alan Greenspan gave a typically dry speech that hinted stocks could actually become overvalued (gasp!) due to irrational exuberance and subsequently plummet when rational valuations returned:

Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

Global stock markets promptly sold off hard at the shocking revelation that stocks might actually become subject to unexpected and prolonged contractions. This sharp reaction to a fundamental truth about markets--that they are prone to the irrational exuberance of participants, and the computer trading programs keyed to this momentum magnify the irrationality--caused central bankers to avoid any upsetting truth from then on.

For the past 18 years, all we have heard is a relentless spew of lies, obfuscations, misdirections and toxic propaganda from central bankers, the most famous examples being we will do whatever it takes and when it becomes serious, you have to lie.
But soon, evasive reassurances were not enough, and central banks had to intervene with unprecedented force to keep markets from collapsing to their "true price discovery" levels. The Fed issued $23 trillion in backstops, guarantees and loans, and other central banks chipped in more trillions. Tens of trillions of credit-money was created and pumped into the financial system to keep gravity from laying waste to trillions of dollars in phantom collateral and assets.
Since the 2008 Global Financial Meltdown, central bankers have polished the craft of combining stealthy intervention in the markets and propaganda threats of unleashing unspeakable powers--the oft-repeated and now tiresome we will do whatever it takes.
What few dare to say in public is this intervention and manipulation amounts to officially sanctioned fraud on a global scale. We have become habituated to the fraud because it now plays out on a daily basis: the slightest whiff of weakness in global stocks is immediately met with some central banker or another issuing yet another promise that the unspeakable powers of central banks is poised to be unleashed yet again, inflating overvalued markets to new highs regardless of any real-world conditions.
There are two analogies that help explain our ready acceptance of this coordinated fraud: helicopter parents and a rigged casino.
Central banks act as anxious helicopter parents, hovering above their failing child, the stock market, lest it collapse in a heap the moment central banks stop "helping" it stay aloft with trillions of dollars in free money for financiers and a relentless shrill, keening cry of we will do whatever it takes to keep their precious darling from suffering any real-world consequences.
Thanks to daily central bank intervention, stock markets act as rigged casinos in which players are openly invited to join the roulette game and bet on red--the ball always drops accordingly. Punters can't believe how easy it is to score essentially guaranteed gains, day after day, as the rigged casino pays out. Message boards are filled with punters' gleeful confidence in the central banks' guarantee that the stock market can only loft ever higher, and that there is no such thing as irrational exuberance.
In effect, the exuberance of punters piling into central bank-rigged markets is entirely rational, because the central banks have destroyed lower-risk returns and encouraged punters to play in their no-losses casino.
We've habituated to this global fraud with the greatest of ease because it benefits us. Who can turn down the promise of guaranteed gains forever?
That no market can keep rising forever has been banished from the central bank lexicon. Central banks can push markets higher forever with their unspeakable powers.
Nice, but as I often note here, risk cannot be disappeared, it can only be masked or transferred to others. As I have explained, risk has been transferred to the currency markets, which are too large for central banks to manipulate as easily as stock markets.
The immorality of participating in fraud in never mentioned. It's not very nice to upset the deliriously confident punters who keep betting on red and winning by telling them they are engaging in and abetting fraud. You can't fault winning, even if it's all a transparent fraud.
But fraud generates risk, and risk eventually breaks out in the "safest" parts of the financial plumbing, the ones nobody gives a second thought to because they're "low risk." At some point, the ball will drop in a black slot, and keep dropping in a black slot as incredulous punters keep "buying the dip" and betting on red.
Using unspeakable powers to generate global fraud is not as sustainable as punters imagine. Those who don't believe in risk can alternatively ponder karma as a guide to the future.

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Infinite QE's picture

20 Replace sound investment with speculation



Headbanger's picture

And McDonald's sales  fall again for 13 months in a row now!

And worse than expected


Must be cause of Fergunson and cold weather.

Urban Roman's picture

And Global Warming, don't forget that one!

Sun so hot, I froze to death,

Susannah don't you cry!

BuddyEffed's picture

" It was on that day that Federal Reserve Chair Alan Greenspan gave a typically dry speech that hinted stocks could actually become overvalued (gasp!) due to irrational exuberance and subsequently plummet when rational valuations returned: "

 Can someone go to see if those Greenspan comments swayed people into piling into "shorts" as a result, and with the resulting powers that be then generating a market rally, and with short coverings ensuing, the end result being the rich got richer?  That would be just the kind of thing ZH readers would find entertaining.

My perusal saw a general trend up, with a little give and take.  There was even a 126 point gain on 12/19 that year.  Anyone know how to check for short coverings?

 See "Are you not entertained?  Is this not why you are here? "Gladiator clip : https://www.youtube.com/watch?v=FsqJFIJ5lLs

Which is worse - bankers or terrorists's picture

"For the past 18 years, all we have heard is a relentless spew of lies, obfuscations, misdirections and toxic propaganda from central bankers"

Try about 560 years, since the Medicis controlled hte Florentine banking system. 

Ahoy Polloi's picture

Try about 2014 years, when Jesus was flipping over money changing tables (& frankly ~ I'm sure it existed long before then)

Ghordius's picture

try with facts. a moneychanger is not necessarily a banker and a banker is not necessarily a central banker, and a central banker is not necessarily a fiat central banker

meanwhile, some of them are scoundrels

Ahoy Polloi's picture

Are you REALLY going to take it upon yourself to argue, metaphorically, about "air" by trying to reroute the conversation into a discussion on molecules?


Be my guest, but you'll have to do it on your own.

Ghordius's picture

and are you really trying to argue that Jesus was facing fiat central bankers?

except that he did, then the moneychangers were exchanging religious, fiat "sacrifice at the temple" tokens issued by the Great Temple against real gold coins minted by the Romans

but that is not the argument you were going to make, were you? you just wanted to make some "rah, rah". be my guest, too

Ahoy Polloi's picture

OK let's break it down:


Moneychangers = Take (in practice ~ steal) gold from people and exchange it for an essentially worthless token (that they deem is the only acceptable offer of sacrifice at temple)


Central Bankers = Take (in practice ~ steal) gold from people and exchange it for worthless paper (that they deem is the only acceptable offer of legal tender to purchase goods & services).


This process is executed in several phases:


1. Confiscate gold (by Executive Order) & PROMISE a gold window tether

2. Immediately DEVALUE that exchange rate once you have gold in hand

3. Never allow audits of your reserves

5. Eventually CLOSE the redemption window altogether

6. Continue to devalue the currency

7. By way of derivatives, manupulate the price of physical gold (and incrementally resupply yourself using the manupulated & counterfeit proceeds)

VOILA! You've stolen gold


Lastly, if your idea of scientific process is to go around and tongue punch a million different fart boxes in order to categorize which farts stink & which ones don't, be my guest. I'll bow to your infinite wisdom in that area of research.

Disenchanted's picture

yup, Longer even than that...

See The Babylonian Woe


History over these last three thousand years particularly, has largely been the interweaving of
both a witting, and an unwitting distortion of the truth, with all the inevitable consequences which have been expected(6) and now are but a little way ahead.

Kings largely became the mouthpiece and sword arm of those semi-secret societies that controlled the material of money as its outward and visible symbols came to be restricted to gold, silver, and copper... The fiat of the god in heaven which had been the decisive force behind that which brought about an equitable exchange, was replaced by the will of those classes controlling the undertones of civilization, leaders of the world of slave drivers, caravaneers, outcasts, and criminals generally, such as was to be discerned on the edges of the ancient city civilizations, and followed the trade routes between them... The instrument of this will was precious metal, whose supply was controlled by the leaders of these classes through their control of the slave trade, since mining was rarely profitable in the case of the precious metals, except with slave labour, even after the development of hardened iron tools and efficient methods of smelting.


Radical Marijuana's picture

Thanks for link, Disenchanted!

Great quote about real history!

Radical Marijuana's picture

Ahoy Polloi, how about hundreds of millions of years of animal pecking orders? Human beings merely added more brains and self-consciousness to the ability of deceptions, backed by destructions, to be ways to survive. There was never any beginning to the abilities to back up lies with violence, since as soon as there was any ability to model the world, then that model was necessarily a relative lie.

My view is that although the article above was a better than average one by Hugh-Smith, it still tends to lend too much credance to explaining the phenomena with solely psychological reasons, when there were much more persuasive ecological reasons which drove the frequency of the psychological traits.

"Irrational exurberance" is the feeling that people get when they are nearer the SOÙRCE of the "money" that is being made out of nothing, that they could personally take advantage of. However, the SOURCE of the "money" made out of nothing was what was more important.

The political economy has always been based on some sort of enforced frauds, because human realities were always organized lies operating robberies, because all living things are necessarily entropic pumps of energy. Human self-consciousness merely increases that, by plunging through deeper looping tunnels of backing up deceits with destruction.

The deeper problem is that there is an almost innate bias of human beings to think using dualistic notions, which has been reinforced by the facts that the government is the biggest form of organized crime, controlled by the best organized gangs of criminals, which systems have waged a war against consciousness in order to be able to do that.

The runaway RISKS are due to the dynamic equlliibria between different systems of organized lies operating robberies being driven further and further out of balance, due to the social successes of ENFORCED FRAUDS promoting attitudes of evil deliberate ignorance.  One of the greatest paradoxes is the phenomenon of controlled opposition, which would surely include Christianity, and the Bible in general, as well as all other old-fashioned religions and ideologies, which continue to promote false fundamental dichotomies and their related impossible ideals, which continue to actually cause the opposite to happen in the real world.

It is extremely interesting that the only recorded instance, in the officially recognized stories, of Jesus being violent towards other people was his attitude towards the money-changers in the temple. However, overall Christianity is a morality taught to Sheeple to bleat, by the Wolves who appear in Sheep's clothing. (And that applies to pretty well all other significant controlled opposition groups that I am aware of.)

The article above was surely correct that FRAUD CREATES RISKS. Since our political economy is based on systematically ENFORCED FRAUDS, the magnitudes of accumulated risks have become of such astronomical SIZES that nobody can fully imagine them anymore! That was redoubled by the ways that people continue to believe in false fundamental dichotomies, and therefore, presume there could be solutions to the problems by realizing impossible ideals.

The production of destruction controls production. There was never a time when that was not the case. The production of destruction is a form of production. Those who pretend to absolutely separate production from the production of destruction that controls it are making it practically impossible to understand the actually existing general energy systems any better.

In my view, one of the most profound, philosophically significant ways that we understand everything BACKWARDS, was how an arbitrary minus sign was inserted into the entropy equations of thermodynamics and information theory. IN FACT, ALL MEASUREMENTS OF POWER AND INFORMATION HAVE RELATIVE NEGATIVE VALUES. However, the biggest bullies' bullshit social stories that dominate civilization have inverted and perverted everything, to portray things in as backwards of ways as possible, so that we are living in a Bizarro Mirror World, where everything appears proportionately backwards.

The banksters, as the biggest gangsters, that control governments, as the biggest form of organized crime, are doing basically the same things as all other human beings have always actually been doing, namely be entropic pumps of energy, that operate through organized systems of lies and robbery. The paradoxical predicament in our civilization is that the biggest bullies have been able to control the opposition, to the degree that everything is presented in as profoundly backward ways as possible.

Human beings were always killing and eating other animals and plants to live, and human beings always had ways to relatively cooperate and compete with each other in order to do that. Groups of human beings specialized in hunting, which became more organized as warfare. There was no beginning to that, it merely morphed and transformed, over & over again, while becoming more & more sophisticated systems of social slavery.

Publicly significant religions and ideologies tend to be forms of controlled opposition. That runs through the most abstract philosophy of science, to the most practical politics. Human systems operate as fractal patterns of organized crime, while the biggest and best organized gangs of criminals promote their kinds of false fundamental dichotomies and related impossible ideals that that is not the case.

IF we are going to have better resolutions to these problems, then that would take better understanding of those problems. At this point in history, we have pumped up the contradictions of human beings understanding general energy systems better regarding most things, EXCEPT THEMSELVES!

The first and second laws of thermodynamics tend to be mistakenly presented as dichotomous. The ways that we understand general energy systems is as backwards as possible, due to the philosophy of science making an ENORMOUS ERROR when an arbitary minus sign was inserted into the entropy equations.

Human beings live through systems of lies backed by robbery, which they present publicly as being positive, rather than negative. That makes achieving better dynamic equlibria between those systems practically impossible, due to the degree to which almost everyone embraces the Bizarro Mirror World image as being correct, when that is actually as backwards as possible.

The contempory banksters, whose history can be traced back through bankers for several Centuries, as well as back through money-changers for millennia, act as predatory parasites. The controlled opposition presents the people who are their productive prey as being "good," while the predatory parasites were "bad." However, all of that is done through ways which are profoundly tangled up in thinking about the world through using false fundamental dichotomies, and their related impossible ideals.

All human beings are entropic pumps of energy, which necessarily are organized lies operating robberies. Since that basic truth is as denied and distorted as much as possible inside our social pyramid style of civilization, the actual magnitudes of the ENFORCED FRAUDS are many orders of magnitude bigger and more serious RISKS than guys like Hugh-Smith present, which tends to be a relatively consistent feature throughout Zero Hedge articles and comments.

AdvancingTime's picture

The dollars strength and the rising American stock market could also be taken as a sign of an unstable global economy. The money flowing in from other countries in search of a safe home screams of a bigger problem! When a strong shift in currencies occurs someone gets hurt and this leads to bankruptcy and contagion.

 A great deal of the shadow banking world falls into and overlaps into the grey world of derivatives. There is no single commonly adopted definition of derivative or derivative contract in the European Union. This plays havoc with what and when reporting rules apply. It also highlights divisions in how national regulators view reporting rules for the $693 trillion over-the-counter derivatives market.

Remember this is only part of a much larger market, it is estimated the total derivatives market includes hundreds of trillions of dollars in non-reported agreements and private contracts. Everyone paying attention knows that the size of the derivatives market is 20 times larger than the global economy. The article below explores some of its ins and outs of derivatives and why they could collapse the economic system.


Ahoy Polloi's picture

 "The dollars strength" LOL


See? That's the beginning of how perceptions become misconstrued & managed.


NEVER equate "high price" with strength. For reference purposes, think of housing (during the naughts), or dot coms during the 90's.

AdvancingTime's picture

Call it weaknesses in the other currencies if you prefer.

1000yrdstare's picture

There has NEVER been a risk for TPTB,  some people will continue to break windows instead of breaking the heads of the shit politicians and bankers... get use the the future, it ain't bright, so remove the shades...

JustObserving's picture

When debt to GDP ratios are out of control in Western countries (over 100%) , and they cannot compete with low labor costs in Asia, the only easy way to generate wealth is to levitate the stock markets with easy money, loose talk and outright manipulation.  The only thing that the US has going for it is the manipulative powers of the Fed which provides wealth through ever-higher stock markets and ever-lower interest rates.  Eventually, unfortunately, all manipulations fail.

insanelysane's picture

Bloomberg has gone off their rocker.  They are becoming less viewable than CNBS.  They explain how the average consumer is stronger by having the douche that heads Blackrock tell a story about how someone he knows did all their Christmas shopping online while flying from West Coast to East Coast.  So I guess that's how all of the FSA, Walmart workers, Dollar store workers, bartenders, waiters/waitresses, bus boys, Uber drivers, are doing all of their shopping.  They were jetting around on Black Friday and that's why store sales were down.

DonGenaro's picture

'twas only Sarah Eisen that made Bloomberg watchable (with sound turned down)

NoDebt's picture

I'll point out that the market didn't reach a bottom in 2008, even as the Fed and others sprayed it down with the liquidity fire hose.  The turn came shortly after mark-to-market rules for securities held by banks were suspended in March of 2009 (never to be reinstituted).


Dr. Engali's picture

Bingo! And this is why we will never see a semi-normal market again. The accounting rules will change and markets will be manipulated all the way up to the end. The worst thing that could happen to this corrupt bastardized system is for any little ray of truth to shine through. It will bring down the whole house of cards.

Sambo's picture

For billions around the world the collapse has already occurred. There is a ray of truth in that.

lunaticfringe's picture

All you can do is accept and prepare accordingly. I'm not sure how much longer they can hold this mf'er together but I get the feeling, that when this thing blows, it will make Vesuvius look like a 4th grade science project.

Dre4dwolf's picture

This is how it works.

Everyone who works in a corporate job say for the past 50 years was pretty much coaxed to divert about 30% of their income into Retirement plans.

Corporations incentive these income investments by offering matching plans.


So im just gona break it down with no time line.

Generation 1: Starts off being coaxed into investing in the market out of their pay (say 10%)

Generation 2: comes in to replace generation 1, is coaxed into paying 20% of their pay in the market (this covers the previous generation while they retire and helps prevent a market crash when gen1 goes to collect)

Generation 3: comes in to replace generation 2 , is coaxed into paying 30% of their pay into the market (again cover gen 2 prevent crash from gen 2 collecting/cashing out)

Generation 4: comes into corporate environment, replaces generation 3, is coaxed into paying 40% of their income into the market (again cover gen 3 so they can cash out without crash)

Generation 5: comes int, replace generation 4 and so on and so forth.

Until the % of income being diverted into the market out of the "last" generation is not enough to cover the previous generations consumption and their own consumption.... then it all comes apart.


The entire 401K and most corporate investment strategies depend on an inverted pyramid scheme, especially now with the new types of securities and "investments" which aren't even investments but house of card style schemes.


O/C I base this on some speculative theory crafting.

But I bet if you charted out the % of corporate income (from salary earners not head ceos and shit) you will see a methodical/rising step ladder graph of % income being diverted to the market between generations.

Factor this in with the probably high rate of turn over, and people leaving their old retirement plans with old jobs (pretty much abandoning it) . .. .  you endup with some liquidity for the people who do endup cashing out.

And thats the design of the system.

Ghordius's picture

sigh... "For the past 18 years, all we have heard is a relentless spew of lies, obfuscations, misdirections and toxic propaganda from central bankers, the most famous examples being we will do whatever it takes and when it becomes serious, you have to lie. "

this is really this kind of statement that makes me sad. CHS, the author of this article, is American, and lives in America

here he rides on this great favourite of the masses, the "central bankers" theme. and takes it as argument in the context of relentless lies, etc.

that there is a great financial industry in the US that spews lies like confetti is... conveniently forgotten. no, CHS takes the safe road, and cites two europeans: ECB's Mario Draghi's "whatever it takes" and JC Juncker's (who is not even a central banker) "when it becomes serious, you have to lie"

and the most interesting part in all this... CHS still does not understand what those two were talking about. or perhaps I'm too hard on him, he does understand, but his tipping jar would suffer if he would say a few unwelcome truths about the great financial betting casino for which he caters, too

+1 for "Replace sound investment with speculation", which is my inspiration for this little rant

buzzsaw99's picture

What few dare to say in public is this intervention and manipulation amounts to officially sanctioned fraud on a global scale.

SheepDog-One's picture

They're all acting shocked about the monster they've created...seems about the time when the monster breaks out of his chains and ransacks the village.