Guest Post: What To Do When Every Market Is Manipulated

Tyler Durden's picture


Submitted by Chris Martenson of Peak Prosperity

What to Do When Every Market Is Manipulated

Hint: cut the strings

If you don't know who the sucker at the card table is, it's you.

~ old gambler's saying

What do the following have in common?

LIBOR, Bernie Madoff, MF Global, Peregrine Financial, zero-percent interest rates, the Social Security and Medicare entitlement funds, many state and municipal pension funds, mark-to-model asset values, quote stuffing and high frequency trading (HFT), and debt-based money?

The answer is that every single thing in that list is an example of market rigging, fraud, or both.

How are we supposed to make decisions in today’s rigged and often fraudulent market environment? Where should you put your money if you don’t know where the risks lie? How does one control risk when control fraud runs rampant?

Unfortunately, there are no perfect answers to these questions. Instead, the task is to recognize what sort of world we happen to live in today and adjust one’s actions to the realities as they happen to be. The purpose of this report is not to stir up resentment or anger -- although those are perfectly valid responses to the abuses we are forced to live with -- but to simply acknowledge the landscape as it is so that we can make informed decisions.

In this report I connect the dots on the fraud, noting both what we already know about and what we'd better prudently suspect is happening (but not yet revealed).  In Part II, we talk about ways to operate, make decisions, and control risk given the sorry state of affairs in our financial markets.

Swimming Naked

As Warren Buffet said, "It’s only when the tide goes out that you learn who’s been swimming naked."

What he meant was that poorly-run companies can appear healthy during boom times but are later exposed as hollow shells when the economic tide retreats. Naturally it's a lot easier to make money when times are booming, but much more difficult when the economic pie is stagnant or shrinking. The dot-com companies of the late 1990s are the poster children for this phenomenon.

My corollary to Buffet’s naked swimming quote is this: It’s only when the pie stops expanding that you find out who’s been running a Ponzi scheme.

The global pie is no longer expanding, and the relentless parade of disquieting economic and financial news can be laid right upon that fact.

Sure, there are the prosecutable examples, such as Bernie Madoff, but state and municipal pensions and the Social Security entitlement program also fit the definition. So does the practice of expanding public debt at a faster pace than GDP, which many nations, provinces, and states have done for many years running. These are all Ponzi schemes in the sense that they require constant growth to remain 'healthy' (or hidden, more accurately) and are therefore mathematically certain to fail. Now that the economic pie is no longer growing like it used to and most likely will not for decades to come (if ever), all of these schemes are rapidly falling apart.

The insolvency of Greece, which is now in a full-bore depression, is simply a reflection of a multi-year Ponzi scheme that has now run its course and fallen apart. It is simply not possible to borrow forever at a faster rate than your income growth, and Greece is now a harbinger of things to come for every country in a similar position. That includes all of the PIIGS, Japan, and the US.

Now that the pie has stopped expanding, all of the countries that have been swimming naked are exposed. Timing will vary, as in this metaphor some were in shallower water (Greece) than others (the US), but timing aside, there really isn't much of a difference between any of them.

Illegal and Condoned Fraud

Where does one even begin with a discussion of all of the rampant fraud that has been revealed of late? Should we suspect that there is suddenly a lot more fraud in the system? Or is the lack of growth simply revealing the extent to which fraud and Ponzi schemes are a significant feature of our political-financial-regulatory-banking landscape? I lean towards the latter view.

I suppose we need to begin this discussion with the fact that any exponential, debt-based monetary system is, at its very core, a Ponzi scheme. It simply has to keep expanding so that there’s enough money and credit manufactured today to meet yesterday's principal and interest loads. Without endless growth, sooner or later the debt pile collapses, and truly extraordinary losses are taken by somebody.

If our entire money system is itself a Ponzi scheme, then it follows that much of what will be based on that monetary superstructure will, almost by definition, share that characteristic.

The garden-variety illegal schemes, such as those run by Bernie Madoff and Peregrine Financial, are easier to cover up and keep running when money and credit are readily available and expanding rapidly. Their early demise just means that they were in the weakest positions and therefore unable to survive the first rounds of crediting/money stagnation.

Next in line is the practice of borrowing at a faster rate than economic growth. That process is already well underway for Greece, Spain, Italy, and Portugal -- but just barely. An enormous gap exists between any practical level of funding and the desired levels of spending, and closing that gap will be a long and painful process.

Following this will be the state-sponsored schemes. Woefully underfunded pensions and entitlement programs will take longer to unravel, but it will happen too in one form or another, most likely by cutting benefits.

The simple truth is that when credit and money expansion stops, all of the various schemes that relied upon the illusion of growth supplied by that dynamic are exposed as unworkable propositions. One summary of the current crisis is this: Credit growth stalled and there simply wasn't enough 'juice' left in the system to cover the various 'legal' and illegal Ponzi schemes.

Socially speaking, as long as the pie is expanding, there is virtually zero public or political support to call out the schemes for what they are. If anything, the opposite is true. It is only once some limit to growth is reached -- the most recent case being the bursting of a multi-decade credit bubble in 2008 -- that the party ends, heads groggily lift, and the painful lack of standards and critical thinking are finally revealed.

The fraud has always been there, often in plain sight, but very few really cared as long as the status quo was being maintained. Obviously and mathematically unworkable municipal and state pension plans are a prime example of this dynamic. For as long as the fiction could be maintained, very few challenged the system, even though they were quite obviously going to be an eventual fiduciary train wreck.

The recent spate of municipal bankruptcies indicates that the ‘eventual’ train wreck has begun and the first few cars of a very long train are off the rails.

Officially Supported Fraud

As bad as the private frauds are, and as corrosive as they are to public trust, they pale in comparison to those perpetuated at the very highest levels. The fact that some frauds are supported and encouraged by the regulatory bodies and official institutions should render them no less palatable to the rational mind. In fact, the opposite should be true.

Recently it has become clear that various regulatory bodies can be counted on to look the other way when certain frauds are aligned with the aims and goals of the state while punishing other frauds selectively and grudgingly. There are many recent examples to support this view.

The LIBOR scandal is a perfect example of regulators ‘looking the other way when it suits us.’ Because a LIBOR rate that was manipulated to inappropriately low levels created the appearance of robust bank health, the Fed and other central banks and regulatory authorities were more than happy to look the other way. Not just briefly, but over many years.

That the manipulation of LIBOR also happened to pad the profits of big, well-connected banks (another prime goal of the central authorities) was just one more reason to tacitly support the manipulation. It’s important to note that LIBOR was and is the main determinant for the rate of interest paid on tens of trillions of loans and hundreds of trillions in derivatives.

If the central authorities are willing to overlook fraud on that scale, how far are they willing to go in other areas? Asked another way, just how serious is the predicament we face, and what are we not being told?

The painfully clear message from all of this is that lying, cheating, and stealing are all just fine, as long as they support the main policy aims of the times (and perhaps a few current or prospective colleagues). That is a main lesson of LIBOR-gate, and it is ugly.

Which Brings Us to Gold

One of the prime reasons that I support the notion that the price of gold is neither free nor fair is that I think there is an incentive for the US and UK central banks (and the others, too) to have no serious questions raised about fiat money. Gold is the only monetary barometer that exists outside of the world of fiat money.

If the Fed was willing to look the other way while banks colluded to keep LIBOR artificially low because that sent the 'right' signal about bank health and boosted profits, do you really think they would not also look the other way if banks could make money by manipulating the gold market into a more stable or even lower price band than it otherwise might occupy?

To me, it is a given that the Fed, et al., would condone literally any and all activities that would boost the apparent health of major banks (their prime clients) and the apparent health of fiat money (their only product). Said more directly, it is unthinkable that they do not have gold squarely in their sights on a daily basis.

The second point I want to make about gold is that with every revelation of fraud and/or price manipulation, I grow more convinced that gold should play an increasing role as an anchor to your portfolio. The lessons of LIBOR-gate suggest a haphazard approach to enforcing the rules and reinforce the idea that perhaps things are a bit worse off under the surface than we’ve been told.

Beyond the regulatory and process lapses (like the oil trading story below) that contribute to both illegal and sanctioned fraud, the most grotesque mispricing of everything begins with the mispricing of money itself. Thanks to three years of money priced at zero percent, the entire system is riddled with distorted prices, especially the price for risk. For example, virtually every pension fund is now essentially forced to lend money to the US government for ten years at 1.5% interest, a ridiculous rate given the risks of inflation and even default that a free market would price very differently.

A final thought here is that we simply cannot trust the prices we see around us as much as we used to. I know that one of the central axioms of traders and reasonable people everywhere is that the market is always right. If the price of gasoline is $3.50/gallon or the price of gold is $1,550/ounce, then those are the correct and right prices.

However, it now seems likely that most of the prices we see are simply reflections of something at once more mundane and sinister: central planning.  First they are distorted by the pernicious effects of mispriced money, and second by selective lack of enforcement.

An Unfortunate Lack of Accountability

The many years that Bernie Madoff was able to continue his fraud despite ample and clear proof supplied to the US Securities and Exchange Commission (SEC), coupled with the complete lack of consequences for the named regulators known to have actively ignored the evidence, tell us simply that above certain levels, accountability has all but disappeared.

Can anyone provide a compelling reason why Jon Corzine is not behind bars or charged with something…anything?

Most recently, the SEC declined to press charges against Goldman Sachs for their role in misleading clients about the riskiness of the toxic mortgage products they manufactured and sold.

Goldman dodges SEC bullet over bum mortgage deal

Aug 9, 2012


(MoneyWatch) The Securities and Exchange Commission has ended an investigation into whether Goldman Sachs misled investors in a $1.3 billion sale of residential mortgage-backed securities arranged by the investment bank in 2006, shortly before the housing crash.


The agency notified Goldman in February that it was looking into whether the company misrepresented the riskiness of a mortgage deal dubbed "Fremont Home Loan Trust 2006-E." Goldman disclosed in a regulatory filing Thursday that the SEC does not intend to recommend any enforcement action against the company over the deal.

If ever there were a more open and shut case, I would be hard pressed to imagine what it might be. The rules over financial disclosure are quite clear, and everything I understand about Goldman's actions in selling these securities crossed that line. Recall that in some cases Goldman was packaging these things specifically so that one client (John Paulson) could short them, while selling the other side of the deal to someone else, while failing to disclose that these particular items had been designed to fail.

Further, in 2010 Goldman paid a $550 million fine to settle federal charges that it misled investors and that a Congressional panel had concluded that Goldman had deceived investors. Yet despite all that, the SEC just can't figure out how to find that any laws have been broken by Goldman here.


Standard Chartered to pay $340 million to settle with N.Y. over Iran charges

Aug 14, 2012


London-based Standard Chartered Bankagreed to pay $340million to settle New York state charges that it illegally funneled hundreds of billions of dollars to Iran, even as other probes by federal regulators are continuing.


New York’s Department of Financial Services surprised fellow regulators last week when it unveiled a blistering report accusing Standard Chartered of conspiring with Iran to launder $250billion from 2001 to 2007 to bypass U.S. economic sanctions.

Note that no criminal charges apply here, just a fine of $340 million (with an “m”) to settle up on a conspiracy where over $250 billion (with a “b”) was involved. Even the idea of ‘punitive’ seems to be beyond the grasp of current regulators and enforcers. Crime does pay and is virtually risk-free from a criminal perspective, but it has to be really big crime and it has to involve a bank.

Meanwhile, the US Commodity Futures Trading Commission (CFTC) is reportedly set to drop a four-year investigation (mainly held in private meetings) into silver manipulation, concluding -- surprise! -- that no such manipulation exists. Heading up the panel is ... wait for it ... wait for it ... Gary Gensler, a former Goldman executive.

Here we might not be overly impressed with the CFTC for having already missed both the MF Global and Peregrine Financial debacles that happened right under their ineffective regulatory noses, but the real damage is the constant erosion of faith in their obviously broken and sometimes crooked model that selectively enforces rules depending on whether or not the alleged miscreant is a very large institution.

Listen, it is really simple and has always been true: If someone can scam a market and make money, they will. Here's another potential example:

Was the petrol price rigged too?

Jul 15, 2012


Motorists may have been paying too much for their petrol because banks and other traders are likely to have tried to manipulate oil prices in the same way they rigged interest rates, an official report has warned.

Concerns are growing about the reliability of oil prices, after a report for the G20 found the market is wide open to “manipulation or distortion”.


Traders from banks, oil companies or hedge funds have an “incentive” to distort the market and are likely to try to report false prices, it said.


Petrol retailers use oil price “benchmarks” to decide how much to pay for future supplies.


The rate is calculated by data companies based on submissions from firms which trade oil on a daily basis – such as banks, hedge funds and energy companies.


However, like Libor – the interest rate measure that Barclays was earlier this month found to have rigged – the market is unregulated and relies on the honesty of the firms to submit accurate data about all their trades.

I have no idea if or to what extent the oil markets have been manipulated, but given the fact that the system apparently relies to some degree on the “honesty of the firms to submit accurate data,” I will have to reiterate that anything that can be rigged for profit will be rigged for profit.

While we might gnash our teeth, or become enraged or depressed at this state of affairs and lack of accountability, I think it’s just as healthy to observe that it is what it is and plan accordingly.

In Part II: Protecting Your Wealth, we focus on the strategies and steps we as individuals can take to decrease our vulnerability to the dysfunction, manipulation, and sleight of hand discussed above. The positive reality here is that there are alternatives to playing the game in the casino by the casino's rules.

Click here to access Part II of this report (free executive summary; paid enrollment required for full access).

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SilverTree's picture

Accumulate physical, bitches!

CH1's picture


And walk away from the slave economy. Start building a free man's economy.

BaBaBouy's picture

Tried And True ... Run To GOLD.

It's Running Out Bitchez !!!


MARIKANA, South Africa | Thu Aug 16, 2012 11:34am EDT


MARIKANA, South Africa (Reuters) - South African riot police opened fire on striking miners armed with machetes and sticks at Lonmin's Marikana platinum mine on Thursday, killing several men in the deadliest episode of a week of union violence.

Heavily armed officers backed by armoured vehicles were laying out barbed wire barricades when they were outflanked by some of the estimated 3,000 miners massed on a rocky outcrop near the mine, 100 km (60 miles) northwest of Johannesburg.

Police opened fire with automatic weapons on a group of men who burst out from behind a vehicle. The volley of bullets threw up clouds of dust, which cleared to reveal at least seven bodies lying on the ground, Reuters television footage showed.

NotApplicable's picture

Gee, with all of this lying, shit must be getting serious, no?

TIMBEEER's picture

The police was surrounded by 3000 angry, armed protestors. I wonder why they just couldn't talk to them, or just taze the men running at them with kinfes and spears.

bigdumbnugly's picture

what to do when every market is manipulated?


aerojet's picture

I love how even Milton Bradley or whoever the fuck owns Monopoly these days has tried to add extra zeros and now they even have a version of the game that uses a swipe card instead of cash.  The trouble is, the old games out there tell the tale.

diogeneslaertius's picture

the second step may even be more important than the first

RaymondKHessel's picture

Physical Au beotchez!

Party on Garth.

daxtonbrown's picture

I'm trying to move from doing real estate and financials into light manufacturing, all physical. Accumulating production material might not be a bad way to accumulate instead of gold.

YHC-FTSE's picture

Good for you. Probably showing grandma to suck eggs, but if you're thinking of starting a manufacturing enterprise, spread the load of your financial burden for capital and fixed costs. It's brave in this climate, but there are loads of people with cash who would be happy to partner up to do something productive (in all sense of the word) with their money. Get concessions from your local government on taxes, else you will start to feel like you are working flat out just to feed all of your profits to the politburo. 

If you're in an enterprise just to accumulate stock, then you will very quickly run into cash flow problems, so if I were you, I would be concentrating hard on the production capacity of your light industrial enterprise, turnover and profitability instead of just hoping to get rich long term on a warehouse full of stuff. Good luck.

HaroldWang's picture

Love ZH but gotta say never been a fan of this Martenson guy. He's been saying the same thing over and over and over again for since 666 SPX. We get it, it's rigged. So why wouldn't you, with that information, stay in the "rigged" game and keep making money??? 

If you're gonna whine about it, at least profit from it and whine all the way to the bank.

NotApplicable's picture

Unless you ARE the bank, you're still fucked.

Rehypothetically speaking.

fightthepower's picture

Its not all about money.  For some of us its about the hope that we might leave a better world for our children.  Riding a trend to make money in an evil system makes you evil.  So go make your money and burn in hell. 

slewie the pi-rat's picture

he's tryin, wangster!  lQQk:

Click here to access Part II of this report (free executive summary; paid enrollment required for full access).

ericFrye has a similar rant up on The Daily Reckoning today:  this line is pretty good donch think?

Wow!…It’s getting harder to hang a felony charge on a past or present Goldman exec than it is to hang panties on a porn star. The darn things just keep sliding off.

and his conclusion is slewie-friendly too [not only b/c it is free] about which assets to consider in this clusterflock of black swans in white hats doing god'sWerk for the propwashed, brainwashed jerk:

The list of such assets is very short…and most of them glisten in direct sunlight.

...speaking of glistening assets where holding the physical is mandatory...

LawsofPhysics's picture

Accumulate physical assets of real value and associate with people of integrity with a similar position.

The only way to "win" when all "markets" are corrupt is not to play in them, period.

All economies are becoming local, even as TBTF gets even "bigger" (full of even more junk paper).

diogeneslaertius's picture

towards a free humanity the world over

diogeneslaertius's picture

stack physical as if you were a chinese central banker and dont look back or you will turn into a pillar comprised of salt and salt-derivatives

Red Heeler's picture

"stack physical as if you were a chinese central banker"

. . . . because you are your own central banker.

NotApplicable's picture

Rent Seeking 101. Not bad work, if ya can get it.

ATG's picture

Brilliant courageous article.

WEB also bought tax credits and wrote naked puts leading to mark to market earnings losses, after describing derivatives as weapons of mass destruction.

Pay no attention to the man behind the curtain...

diogeneslaertius's picture

when the ROI is this cherry morality no longer enters into it, because our culture, our Business culture has been totally corrupted



HaroldWang's picture

Apparently what you do is buy AMZN whose stock price is almost as high as its p/e at 240/share.

diogeneslaertius's picture

the NWO has made a huge mistake. the entire ball game has been predicated up to this point on Deception and being able to hide the fraud.


and now every attempt to move the ball down the field logistically will merely trigger exponential shockwaves of awakening


thanks to everyone at the hedge and all hedglians for helping to create a harmonic resonance frequency capable of shattering this crystal palace built by madmen


dostoyevsky emailed me from orcus and told me that hes proud of each and every one of you

amadeusb4's picture

No, I don't want to gtf out. I want our markets, economy and society back. I want our cities back. I want our environment back. I want a media that reports for ME on issues I find important. The problem is that people have given up voting for their interests for some sort of pie in the sky moral BS like America is going to get better if we prevent the gays from marrying. Wake the F up people. This country has been hijacked by fascists in BOTH parties. The overt fascists in the Republican party and the covert fascists in the Democratic party and they get truck loads of OUR money delivered to them at the end of every day.

CH1's picture

If you want those things, START BUILDING THEM.

TPTB are NEVER going to give them to you. EVER.

America is over. Mourne for a day if you must, but then get up and start building better.

amadeusb4's picture

There are two problems with the "start building them" thinking. One is that generations past built this country for ALL of us. That has been stolen. I want it back. The other is that once a successful market, economy, city whatever is actually built in stark contrast to the rest of America, it will be destroyed and violently. Why do you think the US continues to sanction Cuba?


I want to take back what has been stolen. I want people to go to jail for their crimes. That is the only way forward. Anything else, however noble, is doomed to fail. You can't avoid a conflict. It must be resolved.

CH1's picture

Friend, I don't want to argue, and I am sympathetic with your feelings.

I'm going to give you a few responses, because I think you are a sincere person:

1. It ain't coming back. It will fail, spectacularly. The fiat system is a one-way game, and it has dragged everything else with it.

2. The real foundation of America was individuals with courage. Those people no longer really exist in the mainstream - they've been beaten out. They do, however, exist in the System D markets.

3. Black markets have been thriving in the US for a long time. Look at the illegal immigrants, they have been surviving quite decently, off the books. Look at Silk Road, look at the pot dealers in every town. No, I don't want to deal drugs, and I'm quite sure you don't either, but off-the-books can DEFINITELY be done. It IS being done every day.

The old way isn't coming back, but we can build a new way that is even better. The only hitch is that we have to ACT, rather than waiting for permission and jabbering.


Totentänzerlied's picture

"I want to take back what has been stolen."

A Native American, I see? From which tribe are you?

You come across as an obstructionist leveraging communitarian rhetoric, a nay-saying populist waiting for someone else to do the dirty work.

Nope, sorry, this country is not "our land", its infrastructure and society were not built "for us". It was conquered by people with CH1's attitude, then colonized by people with CH1's attitude, then developed by people with CH1's attitude, and they did it all for their own personal gain - including leaving a better world for their posterity with each generation. The capitalist way, the free human being's way. And yes, toes were stepped on, skulls were smashed, eggshells were broken.

America continues to sanction Cuba to punish Cuba for defying America in its own backyard and for the Bay of Pigs humiliation, it is pure spite, you are implying that Cuba's economy would otherwise be successful if not for American meddlng, and that is utterly insane perfectly rational dialectical nonsense - blame the other guy. Sorry, Cuba failed with or without any American help, and despite Soviet help.

You think the courts will prosecute and convict and incarcerate the people who own the courts and the jails and the police and the judges and the guards? You're absolutely right the only way forward is conflict, we are in conflict and have been for many many years, but courts and trials and jails will have no part in it, they are part and parcel of the system. Taking back what was stolen is a phrase steeped in populism and envy.

It all must be destroyed before we can rebuild in the manner which befits a free people, but that starts with individuals abandoning the old system and preparing for the new, and that means, for each us, beginning to do it ourselves.

Had the people who built this country taken your attitude it would never have been built. They did not expend lifetimes of labor building their legacies for me and you, they did it for themselves, their families, and their communities. It was not "for all of us", that is communitarian propaganda intended to make you feel worthless, powerless, envious, entitled, and beholden to the past. What was stolen from all of us was the culture of productivity and honest labor, the protestant work ethic if you please. And the only way to take that back is by doing it - being productive.

I agree that the old system must fall, but we are not getting back what you consider stolen, and it was never really ours - it was a body of false promises made by the state made in exchange for claims on our lives and labor. That is not what I want back, that is what I want gone. And we are not getting it back, it was never real, it was the bait used to steal what was really ours - ourselves, our freedom, and our labor - the only things with real value and the only things they ever wanted to take from us.

PS: CH1, though we disagree on the inevitability of violence, you are one of the ones who "gets it"; Peace, freedom, and prosperity to you.

mammoth mo's picture

I will do the unthinkable at zero hedge and admit that I am a Black man in America.

I can't take back what was stolen from me anymore than you will be able to. The revenge you seek is from people dead and dying.  Even though their decendents reap the benefits of my ancestors labor I do not seek to take back what was stolen from them.  As God put it to me, you can seek to recover what was taken from you and your ancestors or you can build a future for you and your children.

If you build the proper future what was taken from you and your ancestors will not be necessary.  If you seek to recover what you think was lost even if you recieve it what will your future be?  What will your children's future be?  You have focused on the past and not your ability to exist today.

Oh I would love to see those who profited from the slave trade suffer.  They are dead.  I would love to see those who profited from the funds of the slave trade give it to those who are the decendents.  My fear is the slick involved in the transaction would eventually turn it back to those individuals anyway in most cases.

What are my best opportunities now?  What are my families best opportunities?  Teach them their histroy so they don't fall pray to the same system that hurt their ancestors.  But most important teach them they have no boundaries.  Teach them they control their destiny no matter what evil is in the world.  Teach them that truth is they must remain diligent against scams. But most importantly they must learn to adjust to ever changing versions of the same scam.  Money is a means not an end.



TIMBEEER's picture

Bah, the world is full of black or white or yellow slaves, slave tribes, slave nations. They get over it, evenutally. This is a never ending circle, we think we can learn and prevent it from happening but here we are, another page of history is to be turned and .. (Drumm rolll) we have another facist (call it nazi or communist) government. Bah.

LostAtSea's picture

Bravo Mammoth, you have the right perspective

diogeneslaertius's picture

keep shifting your shield frequencies and we will take down the borg cube

StandardDeviant's picture

Just got back from a flight on which I watched the movie PyraMMMida, a completely over-the-top portrayal of a massive pyramid scheme, based on an actual scam which operated in Russia in the 1990s.  Fascinating, in a train-wreck sort of way...

GrinandBearit's picture

Here's what you do...


rufusbird's picture

When interest rates rise we will find out who is over leveraged.

NotApplicable's picture

That would be credit-card holders.

Remember, they are mostly ALL variable rate now.

ATG's picture

Let's get this straight:

Gold (phsyical) is manipulated, but buy it anyway?

The only sure-fired solution to beat a rigged game is to stay away...

CH1's picture

NO. The prices in fiat are manipulated, but gold is gold.

But yes, walking away from a rigged game is the only sensibe action.

ATG's picture

Physical gold lost -20% of its value in 2011, -75% from 1980 to 1999.

Physical silver lost -47% of its value last year, -92% of its value from 1980 to 2001.

Put not your faith in princes.

Lay not up for yourselves treasures upon the earth, where moth and rust consume, and where thieves break through and steal... 

Red Heeler's picture

The wise man saves for the future but the foolish man spends whatever he gets. - Proverbs 21:20

blindman's picture

gain/loss by what metric? there is the
story, not in cherry picking satifying
time frames to come up with contextually
false statistics. look at this.
KEISER: Sandeep, I wanted to get you back on because you tweeted recently and I quote, “If it ain’t Menger or his direct student Eugene Von BB, it ain’t Austrian. Sorry #Mises : respectfully, too many mistakes were made.” Now the reason I wanted you to comment on this is that many Americans consider themselves Austrian school libertarians, but most will be following Mises. What are his mistakes?

JAITLY: I think his mistake are probably too great to elaborate on sort of on the show, but essentially Mises didn’t look back to Menger’s original axiom which was that value is not outside of your own consciousness. And he didn’t observe what Menger observed about market action in the sense that there are always two prices, there’s a bid and an offer. And von Mises didn’t like to admit that interest was a market phenomenon. He sort of wanted to imply that it’s a sort of natural consequence of not having a present good basically. So to develop a theory of interest without going back to Menger’s original observations is not continuing the tradition in the Austrian way as we would see it. It’s not insulting or denigrating what von Mises has done. He was certainly the greatest economists of the twentieth century. It’s just that he made a slight, few errors of observation. That’s all.

KEISER: Well, the reason why this is interesting and I’m bringing it up here is that this idea that value does not exist outside of mankind’s consciousness, this is pretty much the opposite of objectivism which is Ayn Rand’s philosophy . . .


KEISER: Alright now Sandeep, in your latest Bullion Basis newsletter you write, “Money is gold and silver. Money is nothing else.” And yet when Ron Paul asked Ben Bernanke whether gold is money, the Chairman responded, “No. It’s a precious metal.” What’s going on there?

JAITLY: Well, respectively, Dr. Bernanke is wrong in that regard. But he’s not unique by any measure. Money is the universally acceptable ultimate extinguisher of any debt and, as far as I can tell, fiat credit which is the system that we have currently, doesn’t fit that bill. Throughout time, the universally accepted extinguisher of any debt has always been . . . ultimate extinguisher I should add . . . has always been gold or silver. Nothing else. That is the definition of money. So it doesn’t take much thought to realise that Dr. Bernanke is wrong. Plain and simple. He’s wrong.

KEISER: Alright, so we have clear evidence of this because the US has a debt problem and Ben Bernanke’s solution over there at the Fed is to adjust monetary policy, attempting to extinguish the debt not with gold and silver but with more debt.


KEISER: What he’s doing cannot be considered money.

JAITLY No. No. Not at all. You can’t extinguish credit by issuing more credit. You just end up with a larger amount of credit outstanding. I don’t know whether Dr. Bernanke realises this in the back of his head – I’m sure he does, he’s not a dumb individual – but the consequences of what he’s doing, I don’t think he does realise, or, in fact, any country that’s monetising their debt to this degree. They do not realise the consequences of they’re doing and there will be nothing that they can do once everything starts kicking off, once everything starts spinning. What I want to make very clear Max is that you don’t need marginal quantitative easing from here for asset prices to start escalating. You only need what has already been printed to start spinning more quickly. And once things start spinning, nothing can slow it down. No central bank will be able to slow it down without sending the whole world economy into the second dark ages.
[KR328] Keiser Report: Frankenmarkets and Austrian Economics
Posted on August 16, 2012 by stacyherbert

ATG's picture


The truth is not a popularity contest nor a discussion of how many monetary angels can perch on a platinum pinhead.

Credit will collapse and drive physical down, not up. Food and shelter are more important than money.

MK may run out of physical silver before JPM runs out of naked silver shorts, currently two and a quarter times silver longs on CFTC COT.

US Mint may run out of physical which will not sell until it falls with serious buyers remorse.

Cabela's and Safeway do not accept American Eagles. Bulk junk silver bought at a premium trades for face value there. EBay riddled with fraud.

Huey Newton et al robbed cash product customers. Craigs list car buyers/sellers are robbed.

Speaking of cherry picking contextually false statistics vs truth, an ounce of gold could in theory buy a downtown commercial block of Berlin in 1923.

None actually did, not because people did not have the ounces of gold, but because no one would sell for an ounce of gold.

Just like the Shoah Spielberg German Jewish lady who thought diamonds would buy her freedom from Camp and had to keep swallowing them and digging them out of her feces and reswallowing to keep them from being stolen.

Those that put their faith in mammon will pay the price.

End of story... 

blindman's picture

you make a good point but i don't know
about there being an end of story nor
can i calculate numbers of angels.
see reflexivity and consciousness down
the thread. same as putting your faith in...
different words, same idea ? but one thing
is for sure, when the debts come due the creditors
will accept something that extinguishes those
debts IN THEIR MINDS. that might be more
debt at the right price or it might be a physical asset they find satisfactory, but then again
the debts might be deemed fraudulently or
partially fraudulently induced and
become worth-less? to the significant market
staying away from the death bed and absolute
end of story consideration for the purpose
of evaluating near term and relative probabilities.
anyway, best to you !