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What is a Market?
The Merriam-Webster definition for Market is the following:
- A meeting together of people for the purpose of trade by private purchase and sale and usually not by auction
- The people assembled at such a meeting. This just gives a starting point for this important discussion given the philosophical crossroads that financial markets are facing in today`s evolution of economic theory with regard to social and governmental policy decisions juxtaposed against the backdrop of the underlying nature of basic financial principles.
Global Volatility
The past week saw the Chinese government take drastic measures to keep their financial market from falling further, the market has become as artificial as can be envisioned with sellers facing outright arrest for their actions.
Related - China: What Deflation Looks Like
This really has brought to culmination the ever-trending debate of what role central banks, governments and centralized control have for financial markets. And what is the very nature of markets in general, what is their purpose, their structure, and ultimate sustainability going forward as entities.
Slippery Slope of Market Evolution
The US Central Bank has influenced market prices by lowering interest rates to zero, flooding the financial markets with massive liquidity, and outright asset purchases like treasury bonds. Japan has gone one step further in addition to buying bonds has expanded their Central Bank purchases to other financial assets like equity indexes. Many Central Banks like for example the Swiss National Bank holds shares in US equities like Apple Inc., Exxon Mobil Corp. and Johnson & Johnson to name a few of their holdings.
The Role of Central Planning
China which has long been a centrally planned government structure for economic initiatives who was trying to implement more free market reforms recently has reverted back to its fundamental nature and strategies and tried to completely control its stock market. Basically taking over every aspect of the market, forcing firms to buy stocks, closing stocks from trading, and arresting parties who wish to sell assets in the financial market.
The best face to put on this behavior is that panic and irrational selling has taken over the market, and that the Chinese government is just putting in a giant trading curb in the market to give participants a chance to recover, take a deep breath, and reflect more rationally on the market. The other take on these measures in that they only make things worse, and in a sense have completely broken the market, it no longer exists.
Social Engineering Outcomes & Financial Markets
But the Chinese example is just the latest and final culmination in my mind of the slippery slope of governmental and central bank intervention in financial markets. The rub is this if central banks and governments view financial markets as Wealth Creation and Social Policy Initiatives, as Bernanke himself seemed to imply with his comments on the Russell 2000 during his tenure at the helm of the Federal Reserve, then the culmination of this rabbit hole journey is that central banks and governments have to intervene forever. A consistent forever, i.e., markets have to go up at a right angle forever, every year has to be higher than the previous year. If this is modern market theory than you have to commit forever, there is no stop and start commitment! It is like debt monetization theory and utilizing inflation to monetize an ever increasing debt over time by expanding the money supply.
If markets are no longer vehicles for price discovery, valuation metrics for business prospects and growth projections, or capital allocation vehicles reflecting sound business decisions by management; but rather proxy vehicles and conduits for Social Wealth Creation Policies then is doesn`t really matter if Enron is solvent or not, or a Chinese construction company is bankrupt as long as the government can make these shares appreciate each year in perpetuity. In other words to be a forever appreciating asset, and not a valuation or price discovery mechanism.
Sustainable Commitment
Therefore, two questions emerge can central banks and governments stomach or sustain this kind of commitment forever for financial markets, and will it work even if they do? And probably more importantly is this the best outcome for financial markets, i.e., would markets and financial markets in general and the overall economy be better off as a result of a different approach by central banks and government authorities over the long run?
These are some of the questions that all central banks and governmental policy leaders need to think hard about right now given the trend that has been emerging lately with policy decisions in regards to financial markets.
Call it whatever you want, but it isn`t a market!
My belief is that markets are markets for a reason, whether they are financial markets, the oil market, the housing market, the local farmer`s market or the illegal drug market, that fundamental economic and financial principles of price discovery and valuation metrics determining ultimate value lie beneath what it means to actually constitute a market.
What we have today are not markets, you can call a financial market a market, but they are no longer actually markets in the traditional sense of what it means to be a market. It is also my belief that ultimately the underlying financial and economic principles of market behavior and forces will prevail over central bank and governmental interventions. In the end it is just a matter of time! Markets can be influenced for a while, they can even be changed, but ultimately the core essence of what it means to be a market reasserts itself at often the least opportune moment in time.
Ultimately the assets in a marketplace represent valuation instruments, price discovery vehicles over time, and any approach that tries to circumvent this process is doomed to fail over the long haul as witnessed by how many companies no longer exist on a global basis over the last 50 years. Financial Markets are not socially engineering mechanisms for wealth creation strategies by central banks or governments, they are price discovery and valuation vehicles that are ultimately beholden to the underlying laws of economics and finance. So again I ask what does it mean to be a Market?
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Unfortunately it is far too late for an Econ 101 lesson. The time for that lesson was in 1980. At this point, it's like knowing the calculus numbers for the ballistic trajectory of the bullet that is a millisecond away from splitting your cranium. Irrelevant, until whoever the survivors turn out to be emerge from the rubble.
the chinese have driven the model of the centrally planned market off a cliff, no slope at all. it should be a cautionary tale for planet janet and the trioka beans, but in all liklihood right now they are figuring out a way to mitigate the damage. china is defintely TBTF
No matter what happens in the world, the writers and commentators on this board always put the blame on the government and its regulations. If only we let the "market" do its thing, we are told, everything would be fine and dandy.
Bullmanure! The markets must be regulated in the interest of the public to prevent abuses by thieves, liars and manipulators of all stripes. This is expecially true in China where there is not yet a culture of careful investing and gambling is widespread. What China has experienced is NOT excessive regulation but rather INSUFFICIENT regulation of margins and day trading. They need to have pre-qualification of investors. They need to re-establish their ban on short selling. They need to limit the activities of overseas investors and identify their connections.
You wrote, "They need to re-establish their ban on short selling." Thank you for pointing out one of the many evils of the stock market.
Short selling is not investing; it is artificially divesting oneself of a stock not owned but borrowed for the purpose of creating negative volatility to seek short short-term profit at the expense of stockholders. Owning a company's stock or stock option is no different than any tangible thing one possesses. How do you sell something you don't own? Only the dark wizards of high finance can justify such a perversion of stock valuation. And what has short-selling led to? NAKED short selling of course, where a seller of "invisible" equity is allowed to trade. Not even a casino allows a gambler to make a bet without first pledging an asset.
If an investor is skeptical about a company's performance then don't buy the stock or trade using regulated stock options which are owned, not borrowed. But no, that's not good enough, he must be allowed to whip up market hysteria by poisoning the company's current market value and wrap it around the flag of "hedging" as if it is merely another sophisticated tool to insure against unknown risk. But we all know the corruption that hedge funds have brought to the stock market for the benefit of the one percent of wealthy investors.
The other pro argument for short selling is that it alerts the public to a company's internal manipulation of financial statistics to deceive the public; they cite the Enron debacle as a prime example. Ah, yes, the short seller is Wall Street’s self-anointed “bounty hunter”; the knight who wields the keyboard of justice and with a wink and a nod, makes a quick buck too. We must swallow this flimflam and forget the fact short-selling has evolved into the most rapacious mechanism for distorting the market and squeezing out the small investor.
Short selling and its derivatives serve only the affluent and rich; it is a pernicious scheme to destroy the portfolios of pensions and impoverish the little guy who has worked hard and looks to an orderly stock market that is not subject to short-seller scandalous influences. Short selling and its malevolent spawn naked short selling, must be banned if the general public is going to have any trust in the global trading markets.
The markets must be regulated.....................................................by thieves, liars and manipulators of all stripes.
Yes, the grateful,
I refer to that as
PARADOX OF ENFORCEMENT.
Most people who presume upon the benefits of "free markets" tend to disregard that such markets must have some form of "rule of law." However, after there is any such "rule of law," that generates the problems identified in Plato's Republic: "Who will guard the guardians."
NOBODY has ever provided a good workable answer to that question. In principle there is no good answer, because the only things which actually exist are the dynamic equilibria between different systems of organized lies operating robberies. The only real connection between the laws of men and the laws of nature is ability to back up lies with violence. The apparent benefits of better "markets" emerges from the better dynamic equilibria between different systems of organized lies operating robberies, which are basic to human beings and civilizations, because those operate as entropic pumps of energy flows. The history of civilization has been based upon warfare, which was de facto "free markets in murder," through which the biggest and best organized gangs attempt to develop as much of a monopoly on murder as possible.
DEEPER INTENSE PARADOXES (in which the paradox of enforcement of the rule of law is one of its main manifestations) follow from the degree to which the biggest bullies' bullshit becomes the dominant social stories, through the dominate natural languages and philosophy of science, in ways which enable the biggest and best organized gangs of criminals to operate their "rule of law," which brainwash most people to believe in their bullshit.
There is NO fundamental dichotomy between "organized crime versus government." Rather, governments are the biggest forms of organized crime, controlled by the best organized gangs of criminals. Most of those who promote that there should be "free markets" tend to NOT provide any practical solutions for the problems inherent in PARADOXICAL ENFORCEMENT OF THE RULE OF LAW. Meanwhile, the "markets" actually end up being "regulated" by the most psychopathic people. However, again, most of those who recognize those social facts do not engage in deeper analysis of how and why those developed to become the actual social facts: the political economy is actually built on foundations of enforcing frauds.
Those who recommend more "free markets" tend to deliberately ignore how human history has actually been "free markets in murder," which has enabled those who were the best at doing that to promote their monopolizations over the power to kill, which then backed up their power to rob. Governments exist because organized crime exists, and can not be stopped from existing, and therefore, governments can not be stopped from existing. Instead, the only thing that is possible is that there could be political processes which enabled better dynamic equilibria between the different organized crime gangs. That degree of better dynamic equilibria is the ONLY way in which better "free markets" actually could exist.
However, at the present time, the biggest bullies' bullshit social stories are so totally triumphant that they more and more get away with all of the false fundamental dichotomies. Actually, governments are the biggest forms of organized crime and terrorism, while the best organized gangs of criminals and terrorists are most able to control what those governments actually do. The degree to which enough of the people do not understand that, because they do not want to understand that, is also the degree to which the dynamic equilibria become more UNBALANCED ...
At the present time, the so-called "free markets" have become UNBALANCED to a ratio of something like 100 to 1, due to the public "money" supply becoming effectively privatized, whereby the powers of governments enforce frauds by privately controlled banks. By those means, the "free markets" have been systematically undermined and eroded, due to the ways that "free market capitalism" is destroyed by being able to make "capital" out of nothing as "credits," due to the public "money" supply becoming about 99% issued by privately controlled banks, which are frauds enforced by governments.
At the present time, the vast majority of people do not appear to understand that, because they have been conditioned to not want to understand that, while the few that do still want to promote bogus "solutions" based on somehow stopping governments from being based upon the principles and methods of organized crime, whereby the best organized gangsters, the banksters, currently control governments, to make an almost totally mockery and cruel joke out of the ideals of "free market capitalism."
Idealized "stopping" of governments actually operating as the biggest form of organized crime is NOT possible due to the inherently PARADOXICAL RULE OF LAW ENFORCEMENT. The depth of that problem goes through the heart of the most basic ways that the philosophy of science has compromised with the biggest bullies' bullshit world views. An arbitrary minus sign was inserted into the entropy equations of thermodynamics and information theory. Therefore, the ways that people tend to think about everything continues to be as absurdly backwards as possible.
The general nature of human beings and civilizations is that they operate as entropic pumps of energy flows, which most closely match the principles and methods of organized crime, and must necessarily do so because money is measurement backed by murder. The history of warfare based on backing up deceits with destruction then morphed to include political economy based upon enforcing frauds. There never was any actual "free market" outside of some "free market in murder." Since measurement exists, and murder exists, therefore money exists. All possible "trading" through voluntary contracts done through "free markets" necessarily exists inside of the overall context of robbery, with the most extreme form of robbery being murder, that backs up all the lesser forms of robbery.
The history of warfare selected for the surviving War Kings to create the sovereign states, which have the power to rob (taxation) backed by the power to kill (rule of law.) Warfare was organized crime on larger and larger scales. Those were repeated in fractal patterns, so that the banksters became the Fraud Kings, who were able to apply the methods of organized crime through the political processes, in order to capture control over governments, and thereby effectively privatized the public powers, so that the "rule of law" became using the powers to rob and to kill to primarily enrich the biggest banks and the biggest corporations that grew up around those banks being able to create the public "money" supply out of nothing as debts for everyone else, which frauds continued being enforced by governments.
At the present time, the same as that the public "money" supply have become about 99% privatized, the actual uses of the public powers to rob and to kill are UNBALANCED to a ratio of about 100 to 1, and so, the "free market" economy has become UNBALANCED to similar degrees. "Free trade" has become the kind of language used by professional liars and immaculate hypocrites to more and more cause the opposite to happen in the real world. However, the few people who perceive that tend to never go deeper into the analysis of the degree to which they continue to be controlled opposition, because of the degree to which they continue to presume upon the same old-fashioned false fundamental dichotomies, and therefore, promote the same old-fashioned impossible ideals as the basis for the "solutions" to the problems that the political economy has become so extremely UNBALANCED.
While human beings and civilizations necessarily operate as entropic pumps of energy flows, those are being perceived in the most totally absurd and backward ways possible by practically everyone. Entropy is the scientific approach to understand evil. Therefore, the biggest bullies' bullshit world view was reapplied during the history of the development of science, in order to reverse the meaning of entropy. That enables the biggest and best organized gangs of criminals to get away with presenting themselves as not operating in those ways, while they necessarily operate in those ways.
There were deeper reasons for how and why human systems of artificial selection were driven to become what they are now through the persistent effects of natural selection pressures. In that context, the PARADOXES OF ENFORCEMENT in the rule of law are merely some of the tips of iceberg of all the rest of the ways that we are living inside of Wonderland Matrix, or Bizarro Mirror World, where everything is publicly presented in the most absurdly backward ways possible, due to the degree that the biggest bullies' bullshit dominates society generally, and in particular, the degree to which the banksters dominate the political economy.
Generally speaking, the few who recognize that the higher levels of the social pyramid systems are dominated by psychopathic personalities tend to continue to stay on that superficial level based solely on psychology, rather than look deeper into the reasons how and why human ecology selected for those types of personalities to become dominate in those kinds of social pyramid systems. However, political economy is always inside of human ecology, and therefore, the debt controls are backed by the death controls. However, all of that tends to be regarded in the most absurdly backwards ways possible, by the largest possible number of people, due to the history, for generation after generation, of social successes based on backing up deceits with destruction, morphing to become enforcing frauds. Therefore, that tends to be the context in which the article above asks the question "What is a Market?"
Naturally, that is also the context in which that article attempts to answer that question, as well as is the context in which practically everyone else also attempts to answer that question. On a more profound level, "markets" are the dynamic equilibria between different systems of organized lies operating robberies, or between different systems engaged in the entropic pumping of energy flows. The degree to which the biggest bullies, currently the international banksters, we able to promote their bullshit, is the degree to which those dynamic equilibria have become more and more extremely UNBALANCED.
That extreme IMBALANCE is now manifested in the ways that almost everyone takes for granted that the meaning of the ways that we perceive entropy was reversed. That is merely the most abstract way that everything else has had its meaning more and more inverted, such as how the meaning of the words "money" and "dollar" now mean nothing like those words meant a couple of hundred years ago, but rather, those words now tend to mean the opposite of what those words used to mean.
I REPEAT, we are living inside of Wonderland Matrix, or Bizarro Mirror World, where the triumphant enforcement of frauds has resulted in everything become more and more absurdly backwards. Furthermore, since there is almost nothing now but a core of organized crime, surrounded by controlled opposition, most of that sort of opposition continues to operate within the same old-fashioned bullshit frame of reference, such as by promoting the impossible ideals about what "free markets" should be ...
The article above mentioned, and asked:
That kind of approach usually tends to deliberately make no effort to reconcile the laws of physics with the "underlying laws of economics and finance." Those relationships actually exist in the ways that I outlined above, and therefore, that leads to superior answers to the question "what does it mean to be a Market?"
However, generally speaking, not only do people believe bullshit about themselves, but also they want to continue to believe in bullshit. The results are that the sequence of short-term successes of controlling civilization through systems that enforce frauds are driving civilization as a whole to behave in more and more criminally insane ways, that are more and more psychotically out of touch of the realities regarding what they are doing ... I see no reasonable grounds to doubt that will continue to get worse, faster, because the vast majority of human beings are adamantly attached to believing in bullshit, that perceives everything in the most absurdly backwards ways, and therefore, continue to promote bogus "solutions" to political problems which are similarly as absurdly backwards as possible.
Pretty impressive response. For those that skipped over Radical Marijuana's post, due to it's length, I urge you to take the time to read it.
It's a better argument than the original article.
look phart, he makes his mistake here............. " NOBODY has ever provided a good workable answer to that question. "
based on that assumption, he spins off on his theory. He does not know the power structure.
Weburke:
Your vacuous reply reminds me of this:
Or, which is sometimes translated as:
I do NOT believe anybody has been, or ever could be, able to go completely through the infinite tunnels of deceits which develop out of the history of warfare having its successes based on upon deceits. The oldest book on The Art of War starts by saying that "success in war depends upon deceits," and ends by saying "spies are the most important soldiers." Economics always developed INSIDE that overall context. The entire Western world's history of that, from Machivellie to Clausewitz, confirmed that, with another more recent Russian example being Vladimirov: "All human history can be portrayed as the history of deception."
Your vacous reply, Weburke, asserts that I do not know the power structure. I would respond that NOBODY DOES! The so-called power structure operates through infiinite tunnels of deceits. Therefore, nobody actually is able to fully control that! Most certainly, the international banksters, that have captured control over the "markets" by capturing control of the the "money" supplies that are used in those "markets," can NOT possibly fully comprehend the globalized systems of electronic monkey money frauds, backed up by the threats of force from apes with atomic bombs. Despite the international banksters originally making and maintaining those systems, NOBODY "CONTROLS" THOSE ANYMORE!
NOBODY fully understand the meaning of electronic frauds backed by atomic bombs. The first generation to grow up with those being the existing realities is still alive today. So far, that generation has done nothing to adapt to that, other than allow the MAD Money As Debt systems to continue to be backed by the MAD Mutual Assured Destruction systems, while spashing more MUD, ‘Multilateral Unconstrained Disruption,’ on top of that MADNESS is the only thing that so far has been done, which just multiplies the MADNESS, by plunging us even deeper through the infinite tunnels of deceits that are what "controls" human beings and civilization at the present time.
ANYWAY, Weburke, your reply was empty of any content, therefore, I can not respond any further to such vacuousness. The REAL MARKETS today are electronic frauds, backed by atomic bombs ... while NOBODY fully understands what that will eventually mean. However, my current best guess it that it means that the human species will commit collective suicide, rather than adapt in any better ways to those REALITIES!
Looking at the mass media, as well as alternatives like Zero Hedge, continues to drive me to keep on coming to the conclusion that the vast majority of people are arrogant idiots, whose deliberate ignorance has been powered up and UP by a tiny minority enabling progress in physical science, while political science has been apparently gone past the event horizon into a social back hole, where the "markets" have almost totally become dominated by ENFORCED FRAUDS controlling their "money" supplies.
Meanwhile, my views of the "power structure" are based on applications of the concepts of cybernetics to general energy systems, while your reply provided nothing substantial in the way of being a criticism of that view. But nevertheless, I can sympathize with such vacuous "replies," because AFTER one faces the social facts about the FAKE "markets" being at least 99% dominated by ENFORCED FRAUDS, which matches the social facts that the vast majority of people want to continue to act like arrogant idiots, it apparently will make no practical difference to the civilization "controlled" in that fashion to continue to careen into worse and worse criminally insane behaviors, more and more ...
Apart from indulging in some individualized idle amusements, nothing else is practically possible. The "markets" have become psychotic, to the degree that no rational discussion about those problems is possible with the vast majority of the world's arrogant idiots, which run throughout both the ruling classes, as well as those they rule over, as the systems of organized crime, surrounded by controlled opposition ... There is no publicly significant, genuine resistance to the enforced frauds that dominate the "markets" now ... and there are no good reasons to believe that there ever will develop any sufficiently successful resistance. As far as I can tell, there is nothing else that one can actually do but watch and wait as the human species, as operating through the current civilization controlled by backing up lies with violence, commits collective suicide, because that power structure has become almost completely psychotic!
WALL STREET STARTED OUT AS A SIMPLE FARMERS MARKET!
OH, I GET IT NOW!
GEE THANKS YOU WORTHLESS RETARDED PIECE OF RATSHIT.
NOW GO BACK TO TALKING TO YOUR IMAGINARY FRIEND!
They are a sheep farm now......
Weights and measures were one of the first things created by civilization to facilitate open and honest trade, but now governments and the power players not only have their thumb on the scales, but their entire fat ass. Power and control is the name of the game and they can't imagine any other outcome......