"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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fun Facts's picture

The markets are now all manipulated by the central banks.

This means you either buy overpriced stocks, or you are against them.

Wall street is no longer the place for your savings.

The odds may even be worse than vegas.

GRDguy's picture

Now do you understand why the symbol of The Great RED Dragon was chosen? RED is for blood! Dragon for serpent, or Snakes In Suits. Great because it is of biblical proportions. And like all other warnings passed down, it is ignored until it is too late. That is why Somtimes The Dragon Wins!

Boxed Merlot's picture

For the first time, laissez-faire was boldly thrown overboard...

 

The lesson to “Don’t just do something, stand there” was heeded only where it could do us the worse possible damage, taking back the constitutionally mandated requirement for the government to issue our currency.

By our using privately issued debt instruments as currency while issuing interest bearing notes in exchange for these enlightened individuals printing expertise we will forever be condemned to repeat this never ending story.  Issuing United States Notes as non-interest bearing currency in lieu of their crap is so simple even Lincoln and Jackson could do it.  Kennedy got away with it until, well...

Having the fed use Lincoln and Jackson on their products is one of their sickest jokes and is absolutely disgusting.

jmo.

ramgold2206's picture

This article is nothing we didn't already know; ZH'ers are somewhat more enlightened that Joe public but are you doing anything about it..Im guessing 5% on here are taking active measures to try protect their family/wealth from the incoming shitstorm.. but you can be sure the other 95% are sitting on their computer, armed with a mind full of knowledge, but doing f**k all with that knowledge... except whinge and moan...

we all know there are going to be losers, but there is a COUNTERPARTY... for one to lose, one must gain!! Which are you going to be? a knowledgeable looser is still a looser... Doing something always trumps doing nothing...

my solution... accumulate as much gold as possible any way possible....Am I right acquiring gold? who the f**k knows.. but at least im doing something.....

if you want to accumulate your own gold but don't have the cash... consider becoming an affiliate; refer customers and acquire your gold with your commissions... speak to us today and we can show you a better way

www.teamramgold.com

Batman11's picture

"If a foreign country can supply us with a commodity cheaper than we ourselves can make it," wrote Adam Smith in 1776, "better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country will not therefore be diminished... but only left to find out the way in which it can be employed to the greater advantage."

When the UK was the workshop of the world in the 1800s the US and Western Europe caught up by forgetting all about Adam Smith.

The UK was the home of the industrial revolution and therefore had all the technological advantages.

The US and Western Europe used tariffs on UK manufactured goods to catch up with its more advanced technology.

If Adam Smith's ideas had been popular 100 years ago the UK would still be the workshop of the world and the US would be a third world agricultural nation.

 

Barney08's picture

It's totally simple to understand. The new way the markets work is .... One directional. UP UP & away. If everything is risk then there is No risk. The mind set of just about everyone ex those on this website is: I will buy and I am going to sell at a profit.

There have been no events to lead people to think differently for years. As humans we are creatures of habit, and we have short memories. There is not even a hint of the punch bowl leaving the party.

I can't say what if any event will sober the masses because nothing has to date. So I wait for the coming readjustment. It could be next week or it could be 25 years away. Because THIS TIME IS DIFFERENT! right?

Batman11's picture

There was backing from politicians for sub-prime lending, but not the derivative ponzi scheme the financial sector put in place.

James Rickards in Currency Wars gives some figures for the loss magnification of complex financial instruments/derivatives in 2008.

Losses from sub-prime - less than $300 billion

With derivative amplification - over $6 trillion

"It’s nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" (pg 404, “All the Presidents Bankers”, Nomi Prins)

Even the Japanese banker stupidity at lending into real estate stayed as a national problem after 1989.

It took Wall Street to blow up a housing crash into something the global economy still hasn't recovered from seven years later.

PatriotFirst1776's picture

The beginning of this article is brilliant in its opening example story of the old Chinese woman losing her dough and wanting it back. It harkens to  the fabulously intelligent movie, "Trading Places"....it is all there, folks, to ponder. I especially love when they scream...."TUrn the machines back on!'

But the great point to spotlight here is that we should never be "loose" with our money. I learned that from my folks as a kid. So, when EVER I am handing over money to anyone for ANYTHING, that "thing" better have value. Seems everyone is on the take and trying to scam people at any opportunity that appears these days.....so, be careful and do your homework before you buy anything. There are a series of 10 questions I carry in my pocket when I am about to buy anything of value. I won't bore you all with it. But, I hate to lose principle and I never rush into anything. If a miss the boat, I tell myself...there is going to be another one along sometime soon.

What I liked about this article is that it accentuates the caution we need to adhere to to keep ourselves "clean" and out of any bloodbath (Man, I LOVE WIllie Shakespeare.)

Still, it is a wee bit disheartening that the game is "rigged" more and more and more. I will truly miss the days when I worked on the Merch floor (commodities) in Chicago. It was a physical, contact sport that took incredible focus and restraint to survive and thrive.

That said, I have a very, very, very uneasy feeling about a pending chain of events that will rear their collective heads and, like the well-planned and well-placed explosive charges used to bring down a building upon itself using some explosive elements and its own momentum, and blind side us into a demonic game of musical chairs where ALL the chairs disappear at once leaving everyone standing around saying...."What the.....?"

I keep an eye on as much as I can....and one unsual thing I am watching is the whole concept of the coming and pending "Shemitah of all Shemitahs". Knowing now and seeing now, via the media, TV, Interent, word-of-mouth....etc., what I see and have seen, mankind can, will and will do so with vigor, become extremely nasty and brutal towards others in time of social, cultural and political collapse. It could get ugly beyond anything imaginable.

So, do you run or do you stand an fight? If you run, where do you go? If you stand and fight, how do you compete and win? Just asking....

http://www.theliberist.com

MrBoompi's picture

People around the world are no longer allowed a 5% rate of return on savings accounts.  What are they supposed to do?  Return to keeping money under the mattress?  In the former world, someone could buy some gold and as the currency was devaluated the price of gold would rise.  But manipulation now prevents this simple form of wealth protection as well.  I think we are all discovering the money we think is ours is actually owned and claimed by others who are far wealthier and more powerful than we are.  It's our sweat and blood that fund their guaranteed returns.

lakecity55's picture

Anything you muat have has no counterparty risk