"Rigged" - The Most Absurd Global Financial Situation Ever

Tyler Durden's picture

Submitted by Tim Price via The Cobden Centre,

One woman, who declined to give her name but said she is almost 80, invested RMB 20,000 ($3,200) when the market was at 5,000 points. “I’ve lost two thirds of my money,” she said, her voice cracking. “I really want it back and when I get it, I will never invest in the stock market again.”

 

“..These elderly investors were entering the back half of their lives at the moment when China began to embrace reform. “Old people often don’t understand economics,” says Nie Riming, a pensions expert at the Shanghai Institute of Finance and Law. “They are easily duped.”

 

– From ‘A bull market with Chinese characteristics’ in The Financial Times, by Tom Mitchell, Gabriel Wildau and Josh Noble, 11 July 2015.

A man may be extremely intelligent, but mankind, as a whole, is pig-ignorant. We are all fools. To put it another way, we can, as individuals, gain much knowledge and perhaps even wisdom during a lifetime, but the likelihood of that knowledge and wisdom persisting through generations may well be vanishingly small.

How else to explain the festival of incompetence currently barrelling its way through the financial markets ?

“It couldn’t happen here,” conclude western investors as they watch the increasingly desperate machinations of the Chinese authorities, for example, as they attempt to put a floor under stock prices. Desperate, as in ridiculous, desperate, Basil Fawlty-ish lengths to prevent reality from crashing in upon a deflating stock market bubble.

Government buying stock to support the market ? Check.

 

Government halting trading in half the stocks on the market ? Check.

 

Government banning large shareholders from selling for six months ? Check.

 

Government suspending any further IPOs ? Check.

 

Government slashing interest rates ? Check.

 

Government ordering companies to buy their own shares ? Check.

The FT’s James Kynge reports:

“On Sunday, the new graduates of Tsinghua University are set to gather in their smartest attire to celebrate degrees from one of China’s most prestigious institutions, a place that has fostered generations of political leaders. Just after the ceremony starts – according to a written agenda – the graduates must “follow the instruction and shout loudly the slogan,

 

‘revive the A shares, benefit the people; revive the A shares, benefit the people’.”

 

“It couldn’t happen here..”

Apart from western governments bailing out their own bad banks, or creating trillions of dollars, pounds and euros of ex nihilo money and using that money to suppress interest rates and bond yields and currencies, and boost their own stock markets..

“Nobody knows anything,” was William Goldman’s sardonic assessment of Hollywood in his classic memoir on the movie business, ‘Adventures in the screen trade’.

In finance, things are subtly different. “Nobody learns anything,” appears to be the mantra. If one generation happens to stumble upon knowledge – probably involuntarily, and learnt at great cost – then the next generation scampers blithely away from it and on towards some fresh disaster.

From ‘America’s Great Depression’ by Murray Rothbard:

“Mr. Hoover met the challenge of the Great Depression by acting quickly and decisively, indeed almost continuously throughout his term of office, putting into effect “the greatest program of offence and defence” against depression ever attempted in America. Bravely he used every modern economic “tool,” every device of progressive and “enlightened” economics, every facet of government planning, to combat the depression. For the first time, laissez-faire was boldly thrown overboard and every governmental weapon thrown into the breach. America had awakened, and was now ready to use the State to the hilt, unhampered by the supposed shibboleths of laissez-faire. President Hoover was a bold and audacious leader in this awakening. By every “progressive” tenet of our day, he should have ended his term a conquering hero; instead he left America in utter and complete ruin – a ruin unprecedented in length and intensity.

 

“What was the trouble ? Economic theory demonstrates that only governmental inflation can generate a boom-and-bust cycle, and that the depression will be prolonged and aggravated by inflationist and other interventionary measures. In contrast to the myth of laissez-faire, we have shown [here] how government intervention generated the unsound boom of the 1920s, and how Hoover’s new departure aggravated the Great Depression by massive measures of interference. The guilt for the Great Depression must, at long last, be lifted from the shoulders of the free-market economy, and placed properly where it belongs: at the doors of politicians, bureaucrats, and the mass of “enlightened” economists. And in any other depression, past or future, the story will be the same.” [Emphasis ours.]

There’s a line in ‘Macbeth’ when the protagonist, beginning to understand the havoc he has caused, starts to succumb to exhaustion:

“I am in blood

Stepp’d in so far that, should I wade no more,

Returning were as tedious as go o’er..”

Precisely as Rothbard predicted, the politicians, bureaucrats and “enlightened” economists of the euro zone are now coming to terms with their own terrible legacy in the form of Greece. Return, or go on ? Either choice requires wading through an unconscionable deal of blood.

Mario Draghi at the ECB gave us the phrase “whatever it takes”. Now the policy chiefs of China are running with it.

This is the most absurd global financial situation we can remember. There may have been wilder outbreaks of mass fatuous behaviour – as Adam Smith could easily have said, there’s a great deal of absurdity in a market. But we have long held that if you don’t understand the rules of the game, best not to play the game. Doing anything in credit markets today involves making a macro market call that is fundamentally impossible. All debt markets have become speculative arenas courtesy of central bank activity.

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VinceFostersGhost's picture

 

 

Rigged....screwed....I can think of a plethora of words.

TeamDepends's picture

Happy (official) Jade Helm day everybody! Today, our wonderful government begins "mastering the human domain". Sweet, we always wanted a master didn't we? Could it be that these rigged markets are rigged to explode here real soon and lo and behold, there are troops everywhere to deal with angry citzens?

Captain Debtcrash's picture
Captain Debtcrash (not verified) TeamDepends Jul 15, 2015 8:41 AM

It’s no longer the realm of conspiracy theory, there isn’t even the illusion of the markets being unrigged. It is taken for granted, it feels surreal, but I think the acceptance of market manipulation, particularly from central banks is a sign that they system is about to fail and an overhaul will be necessary.

Hopefully we can move back in the right direction in the aftermath, but I’m not holding my breath.

Ghordius's picture

so if financial markets are rigged... is that a reason for the eurozone to go back to the old 19 currencies? so that those rigged markets can play with them, I guess

as a reminder, rigging markets has a cost, too. only the deepest pockets can rig market for a prolonged time. and who bears those costs, at the end?

I see Adam Smith is trotted out, here. as another reminder, that was the economist that warned us all about the very concept of a limited liability corporation. let's us all wonder what he would have said about the concept of the megacorporation that is beyond national borders, for example

MonetaryApostate's picture

Of course it's all rigged, the wealthy control everything, and they are leading us all towards a digital prison...
http://galeinnes.blogspot.com/2015/07/the-awakening-of-technology.html

shovelhead's picture

Meh.

Once the Jade Helmsters find out a bunch of Texas counties are dry, they'll pack up and leave.

Encroaching Darkness's picture

But they are in the wrong places! The West - Southwest is NOT where the real problems will start, come the Crunch - it's the Eastern and Coastal cities, where the FSA reigns, that sudden loss of EBT cards and welfare checks will wreak havoc. True, there will be some havoc out West as well, but there are far fewer people out West - so that when the tides of suffering, starving humanity come looking for any food, supplies or energy to be found, it's the East that will need troops, simply due to numbers. Will that lead to foreign intervention, in order to protect our "leaders" from the just desserts of their policies?

I doubt the foreigners will be able to spare many troops to quell the Americans - they will have their own angry, starving mobs to contend with.

XAU XAG's picture

It's all been "Rigged" ..................since Adam and Eve

VinceFostersGhost's picture

 

 

Adam raised a Cain....and now they're running our banking system.

 

Which explains quite a lot.

Bank_sters's picture

a lesson...

Once upon a time in a village a man appeared who announced to the villagers that he would buy monkeys for $10. The villagers knew that the jungle held countless monkeys, easily caught. The man bought 2 thousand.

 

As the supply diminished, they become difficult to catch, and villagers returned to their farms.  The man announced that he would pay $20. The villagers renewed their efforts and caught 1,000 more monkeys.

The supply quickly diminished, but before they returned to their farms the man increased his offer to $40 each.  Monkeys became so rare that it was difficult to even see a monkey let alone catch it. But they caught 500.

The man now announced that he would buy monkeys at $100! However, since he had to go to the city on some business his assistant would now buy for the man.   The man departed.

Then the assistant told the villagers, “Look at all these monkeys the man has in that big cage.  I will sell them to you at $50 each. When the man comes back you can sell the monkey’s back to him for $100.” The villagers queued up with all their saving to buy the monkeys.  The assistant took their money. They never saw either the man or his assistant again.

VinceFostersGhost's picture

 

 

Never arrested....not even charged.

 

The feel good story of all time.

cpnscarlet's picture

As an SIT grad, I told the Alumni Association to F-off with their requests for donations as long as Corzine still has his honorary doctorate.

jakesdad's picture

of all the non-prosecutions since 08 his is the one that blows me away more than all the rest combined!  mfg was not some 3-letter acronym alphabet soup trivially deflected off a lay jury w/a chewbaca defense (well, it was this too BUT), it was a naked a case of outright theft as can be imagined!  and w/mfg having gotten away w/it we're now seeing firms attempt to codify it into law!

NoWayJose's picture

Have to add to this - the villagers borrowed money from the bank to buy the monkeys at $50!

JustObserving's picture

All debt markets have become speculative arenas courtesy of central bank activity.

Inaccurate statistics are a major threat to markets today.

Fed says inflation in USA was 0.8% in 2014.  Chapwood Index says it was 9.7%.  So what are the consequences?

Let's use a Zero Coupon Bond Calculator to see the effect of fake inflation on a $1000 bond  for 30 years:

A zero coupon bond is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity

With Fed's 0.8% fake inflation, Zero Coupon Bond Value = $787.38

With Chapwood inflation of 9.7%, Zero Coupon Bond Value = $62.20

So with Fed's inflation assumption, you can borrow $787.38 for 30 years and pay $212.62 as interest

With Chapwood inflation, you borrow $62.20 for 30 years and pay $937.80 as interest

With Chapwood Index, if you borrow $787.38 for 30 years, you pay $11,871 as interest.  Or 55.83 times  that with the Fed's inflation  adjustment.

http://www.chapwoodindex.com/

http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...

Panafrican Funktron Robot's picture

Thanks, missed that article and was not aware of this index, had been relying on ShadowStats.

dimwitted economist's picture

no Fucking way is anything "Rigged" JEEEZZUZZZ you people are Cynical! 

LawsofPhysics's picture

Despite what the nobel laureate says, debt that can never be repaid is not an asset.

Cold-Pragmatism's picture

Becareful about Economic Noble Laureates.

Let's get something straight about economics, economists and noble laureates of economics (that means especially you Krugman); NEVER has an economic theory EVER lasted the test of time. Every single economic theory has failed! EVERY SINGLE ONE. There isn't a single economic theory that works, not even the ridiculous law of Supply and Demand. Nothing in economics works, and why is that so? Because economics is based upon rational logical conclusions. News flash! Humans are not rational.

Mankind has existed with out economic theory for thousands of years. But since the invention of economic theory, we have had an incredible amount of economic turmoil, thanks to the worst invention in the history of Mankind, Central Banks.

Krugman you going to give your Nobel Prize back? Your New Trade Theory has absolutely nothing in it that comes even close to what is happening today, its pure science fiction! How about giving back that prize!

Tribulation Blues's picture
Tribulation Blues (not verified) Jul 15, 2015 8:36 AM

Those who run it are Satanists, this is to be expected. Visit the following link for leaked NWO website containing extraordinary photos of Illuminati posing with Annunaki ET's! (Don't trust link? Run through Norton Safe Web)

http://revelation12.ca/?p=2089

apberusdisvet's picture

When this blows, it's going to be a doozie.

Money out of TBTF banks: check

Pantry stocked:  check

Shotgun and ammo to ward off the FSA: check

Well hidden PMs and cash:  check

 

Brazen Heist's picture

Yep its a situation where the plunge protection team and the lenders of last resort are the ones desperately holding up the shitshow.

When the next crisis comes, how much lower can they lower interest rates? They have hit the floor. What then?

Dilemmas of a central planner.

aleph0's picture

All they have to do is stop rigging the Gold price, so that the 95% Fiat Devaluation "resets all market prices" back to normal.

J Jason Djfmam's picture

An interesting meme concerning the science regarding Schrodinger's Cat,

and the TBTF bank at the core of all this financial madness.

  • An experiment involving a superconducting quantum interference device ("SQUID") has been linked to the theme of the thought experiment: "The superposition state does not correspond to a billion electrons flowing one way and a billion others flowing the other way. Superconducting electrons move en masse. All the superconducting electrons in the SQUID flow both ways around the loop at once when they are in the Schrödinger's cat state."
Cold-Pragmatism's picture

Ladies and Gentlemen,

This is only the beginning! Thank you to Greece who doesn't have the courage and/or where-with-all to exit the euro and do what is right for themselves and for Europe, we now have the situation that 50 billion euros of hard assets are in a fund ready to be cashed in to pay Greece's debt. These Greek assets are worth...excuse my lousy greek...SHIT! How can they be worth anything, would you buy a Greek airline, they haven't been profitable in 50 years, whould you buy a Greek port, they haven't worked well since Pericles sent out ships to take all that gold back from Delian, and so on. But no matter, Draghi is here! Thanks to Draghi and his "We will do whatever it takes," promise we are going to see pump priming of the stock markets like the likes never seen before, including what the FED has been do for the past several years. Stocks are going to soar in Europe, mark my words. Those assets that the greedy European Governments now have want them to be worth something to they call sell them for top euro. The ECB is going to out do the FED. It has too! How are all those banks in Europe going to recapitalize? How are all those derivatives that are hanging over Deutsche Bank like the proverbial Sword of Damocles going to be neutralized? There are only two ways to clear the debt nightmare we are in, pay down the debts and thus neutralize the derivatives that are underwriting them, or decrease their value via PSEUDO INFLATION. By pseudo I mean inflation that is real inflation but it is never officially accounted as such. We all know that inflation has been really running at about 7 to 8% for the last 15 years, but officially it has been weighed down by new calculation methods that make it impossible to get higher that 2 or 3%. But this inflation will have the same effect, raise the value of everything, including the crap assets that will becoming to market near you in the next few years.

For the next few years, there will be no financial crisis, like in 2008. This time the ECB is going to print to nirvana! And the FED will not raise interest rates, that is all bluster....the moment they do the US government will be in crisis. With a soon to be 20 Trillion $ debt, a 1% rise in interest rates is 200 Billion in extra payments that they would be faced that will be in the pipeline, ain't no way the morons in congress can deal with that.

Ladies and Gentlemen, welcome to the latest South Sea Bubble! This baby has a long way to go yet, the markets are just starting to go parabolic....wait when they go hyperbolic! Remember those two who once stated a 35,000 Dow? That's nothing, we are going to see 50,000 and maybe threaten 100,000! And then....

I'll see you all in hell...bring cognac I hate beer!

BoPeople's picture
BoPeople (not verified) Cold-Pragmatism Jul 15, 2015 9:15 AM

We are already seeing a bubble collapse, the (metals) commodities bubble. It is not always the same bubble; sometimes stocks (1987, 2001, 2008), sometimes housing (2008), sometimes commodities (1980, 2015), sometimes bonds (1994) ... sometimes combinations of all of them.

The question is whether there is ANY validity to the 7-year cycle (by whatever name you call it) or it is just a ruse to fool people.

Cold-Pragmatism's picture

I'll only say this. Read the South Sea Bubble, it wasn't straight up and up and up. There were drops along the way. What we are seeing are sucker drops. Drops in the markets to draw in the suckers. there is TONS of money floating around, thanks to the FED. That money has to go some where, it will not stay idle for long.

I predict, DOW to push through 50,000 and head for 100,000, and the Euro to get down to about 70-80 cents US maybe lower. This pig of a market has South Sea Bubbles everywhere in it. There will be a ton a of money to be made, but even if you make a killing, the after effects are going to hurt no matter how rich you are. This monster is going all the way.

I hate to say, but usually when things like these financial armagaedons happen, you need a war to get yourself out of it. Funny enough, we could have that, if IS keeps going as it is in the Middle East, Europe and IS will be heading for a major war.

Anyway you look at it, the future sucks, and sucks big time. I don't understand anyone who wants to bring children into this mess of a world. There is nothing to leave to them that is positive. The sins of the past are catching up with us...you blame the older generation, the pensioners, for all this. They had a chance after WW2 to make things better, and what did they do....they got greedy and selfish, and put all the bills on the children, grandchildren and ahead. Damn them!

BoPeople's picture
BoPeople (not verified) Cold-Pragmatism Jul 15, 2015 9:41 AM

Every time the Fed increases money supply, money velocity drops. I am not seeing a big advantage to concentrating money more than it already is... which is what your prediction will do.

The only thing that war does for getting out of debt is that resources become scarce and the debt is ultimately forgiven. Maybe this time we can skip the middle (war) part.

That is of course unless war is THE necessary part of the real agenda... and everything else is just a pretext.

One can never blame the people except for their personal frailty. It is the monopolistic money power that has complete control over the situation. They always give free samples (like drugs) to start and then later they come to collect the souls that they now own.

The South Sea Bubble is a story of corruption and regulatory capture ... it is familiar to me.

Cold-Pragmatism's picture

Actually, with due respec BoPeople, when markets go hyperbolic, like it did during the Tulip Craze, the velocity of  money went, for the lack of a proper mathematical adjective, super-hyperbolic.

The velocity of money, that is the degree of how many hands are touched by a unit value of currency, will spike fantastically, when everybody is eager to turn around a fast profit. Right now, the VIX (volatility of trade) is low in comparison, and the velocity is nothing much to write about, agreed. But when you see everyone jumping the market, pushing the DOW up not 1,000, but 5,000 points in a day, and the S&P doing 1,000 pts in a day trading, that's when your going to see the velocity of money approaching the speed of light!

And nothing can go faster than the speed of light, not even a super charged dollar or euro. Oh what a sight that will be...it will be mesmerizing! People will all be caught up in the euphoria. This happens every hundred years or so, isn't it interesting that our 2020's are just around the corner, i've been told the 1920's were something to behold, New York or Berlin, everything was for sale, and I mean EVERYTHING. We aint their yet BoPeople.

Here comes the 2020's, may they be as glorious as the 1920's! The Roaring '20s are coming back! Who will be Gatsby in our '20s?

What shall  we call our '20's...Glorious '20s, how about Outrageous '20s, or Sensational '20s...we have to get ready guys! The party is soon to begin, its only 5 more years to the '20s, we got to have our outrageous era!

Oh boy, are the 2020's going to be big! If you really want to understand how outrageous the 1920's were, read up on Greta Garbo while she was still in Berlin! Oh brother, Sodom and Gomorrah were bastions of saintly innoncence compared to what those naughty germans were like in Berlin! I here Berlin is starting to swing again...just in time!

And for those confused historians that only know lies, that is the majority of them, the reason why Hitler largely went into politics and came into power, is because he abhored what was going on in Berlin. To him Berlin was a horrible evil hole of sex, drugs and the devaluement of the German identity. And no I am not going to mention, THEM, but I will say, guess which group of people profited the most from this? Ah what if the textbooks only would write about the truth, the world could/would/should be a better place. They say you should learn from history....but if you read the history books that are supplied in the schools you only get lies. SEEK OUT THE TRUTH, its more sinister and horrible and sensational than what people generally know. Seriously, go to the deep web, and read about Greta Garbo... WOW! 

And so the cycle will repeat again...who will be our next Hitler? The European countries are getting primed for another horror story, we have a new enemy readying, Islamic State. What goes around comes around, the circle is closing again!

 

 

BoPeople's picture

I agree that when things go hyperbolic money velocity by necessity would be hyperbolic as well. What I am saying is that would be a massive trend reversal. I do not think that is going to happen ... for those not inside the Wall Street system, been there done that, got the scars to prove it. The new generation does not have the financial capacity. The Wall Street insiders can chew themselves apart for all I care.... no one will shed a tear for them.

As for Hitler, I am not 100% convinced that he was not killed in the Bierhall Putsch. He changed and everything accelerated after that. It does not make sense to me that he sat in jail writing Mein Kampf ... too similar to whoever the dude is that supposedly wrote Dreams of my Father.

hllnwlz's picture

Anybody ever stop and think that it was the war that made so many of them such shortsighted douchenozzles?  The boomers were barely removed from what happened, surrounded by it, really, and so of course, knowing that your country could call for your death in service at any time (reinforced by our little sojourn in Vietnam) the brain clicked over to "Eff it. I'll get whatever I can now before they take my life"?

War. Huh.  Good God, y'all.  What is it good for?  ABSOLUTELY NOTHING. 

 

BoPeople's picture
BoPeople (not verified) hllnwlz Jul 15, 2015 11:27 AM

"Say it again"

Batman11's picture

While the bubble is inflating people get the true joy of Capitalism.

Making money while doing nothing.

 

Markets are irrational and have been since Tulip Mania in 1600's Holland.

Do not look for rational explanations, the prospect of easy money turns human beings into gibbering idiots.

 

Stocks, house prices, <yet another asset type> are going up in value.

I have heard of someone who has made lots of money, I want in.

I am making money, I need to borrow money to carry on investing and make more money.

Gibber, gibber, gibber ....................................

The bubbles burst; I am going to be ruined.

No more gibbering, till next time.

 

BoPeople's picture
BoPeople (not verified) Jul 15, 2015 9:10 AM

"A man may be extremely intelligent, but mankind, as a whole, is pig-ignorant. We are all fools. To put it another way, we can, as individuals, gain much knowledge and perhaps even wisdom during a lifetime, but the likelihood of that knowledge and wisdom persisting through generations may well be vanishingly small."

True. AND, as additional evidence, private companies typically do not last through the third generation. There always tens to be a misalignment of priorities and motivation.

Which is why I find it very odd that there are some agendas that have persisted, not for just a generation or two, but for many, many generations of man. The choices are:

1. These agendas are organizational in nature and the organizations are able to maintain them by passing them from generation to generation, even though their origins and purpose may become obscured
2. The agendas are ingrained in our DNA and will always come to the fore
3. There is a power that exists behind the agendas who's lifespan vastly exceeds that of normal man

So, while mankind as a whole is totally unprepared to defend itself from these agendas, they persist and become increasingly successful.

While I have no proof, my assumption is that the answer is 3. assisted by 1. If one uses this as the basis for what is going on in the world, it makes infinitely more sense. Who was Kennedy, Wilson and Disraeli etc. talking about?

Cheers!

joseJimenez's picture

wether you realise it or not, you just made a case for the Supernatural.  Becareful!  There are some here that will drive a stake thru your heart.

BoPeople's picture
BoPeople (not verified) joseJimenez Jul 15, 2015 9:20 AM

Lol ... I have experienced and believe in the supernatural. It was not always so for me.

I guess it all depends on what you define as natural. It may ALL be natural. We just do not normally experience it or recognize it on a daily basis. So, we call it supernatural.

By-the-way, thank you for commenting. On the rare occasion that I put these types of comments out there, people will generally not touch them with a 10 ft. keyboard. They take them in, mind you, but won't touch them.

HopefulCynical's picture

Which is why I find it very odd that there are some agendas that have persisted, not for just a generation or two, but for many, many generations of man. The choices are:

4. Psychopathy is physiological, therefore genetic, therefore inheritable. What you are seeing is the agenda of a handful of psychopathic dynastic financier families, that has been handed down for generations with a centuries-long time frame.

Ban KKiller's picture

I love the smell of freedom in the morning. 

fromthinair's picture
fromthinair (not verified) Jul 15, 2015 9:10 AM

zh, now you are throwing the towel... struggling between rational and irrational. But, sorry, this is The Plan B. .. the death of Capitalism is in progress. someone said capitalism died already... no no .. that you still have belief in yourself is a sign that capitalism may be down but not out... you will lose such belief at some point.

Cold-Pragmatism's picture

No I beg to differ, that's the date of the creation of the FED. 1694, is the date you want, the first central bank in the world, The Bank of England. The FED is based on that model. From the creation of the Bank of England, you thank them for the creation and maintanence of the crazy bubbles, like the South Sea Bubble, and depressions we have had till modern times.

firstdivision's picture

Actualy the first CB is Riksbank

firstdivision's picture

Government Intervention = Politically rigged

laissez-faire = Bank rigged

 

Pick your poision.