It is my thesis that the inflation, deflation debate is flawed because we no longer have reliable price signals. The overwhelming domination of program trading on various exchanges has fundamentally changed the way prices are created and represented in the economy. All ‘efficient market’ theories are dead.
In place of reliable price signals (based on the supply and demand of buying and selling) we have price signals that are generated by computer algorithms; i.e., computers executing program trading, high frequency trading and algorithmic trading — that account for up to 70% of the trading activity on the NYSE (or 100%, if you consider any shares traded — not involved in program trading — can’t buck the pricing monopoly of the computers).
Program traders have a virtually infinite line of credit, pay virtually zero commissions, and are backed by banks on Wall St. with strong political connections who are ready to bail out any losing bets these computers make.
Plus, the computers are able to do something normal buyers and sellers can’t do. They can pick a price they want a security to trade at and then fill in all the necessary trading volume needed to get the price of the security to that point. In other words, you can program computers to rig markets.
In this new rigged market capitalist model, the corrupt bank picks the price it wants a security to trade at and the computers buy and sell with each other until that price is reached; thus providing an audit trail of trades that looks on the surface like actual price discovery.
Tags: deflation · gold · hft · inflation · max keiser · nyse · price discovery43 Comments
![[Most Recent Quotes from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_euoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_caoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_bpoz_2.gif)
Gold falling Dude!
Thought i mention it
Mike
The use of the system by naive people feeds it with the trust that keeps it alive. That is why there is such a broad ongoing effort to create and keep naive people.
“Unusually uncertain”..me? I wasn’t in the room…
The market is like the USA THE Evil Empire rottting from within. USA is a lot like thee Weimar Republic just befor Adolf Hitler. Wall Street is runned by Nazis. Theyr are showing their true colors. A rotten democracy runned by fuckin psychopath killers and gangsters. Sorry. It’s the truth. The market died a long time ago when I think about Godlman Sachs and JP Morgan. There is no real market left.
How I Almost Single-handedly Topsy-turvied the
European Banking System
and Grew to be the Most Hated Individual at Bahnhofstrasse 45
in Zürich, Switzerland…
Jean-Paul Sartre, my “spiritual” father and one of my most appreciated philosophical mentors, once speculated that Life is absurd. The more I advance in age, the more I find myself chuckling at the ridiculousness of human nature and the members of this species which never fail to provide me with oodles to laugh at and even cry for. And my twenty-one years in the north of Northamerica, my one year in the south of Southeast Asia, my eight years in the south of Northamerica, my eight years in the north of Southamerica, and now my twenty-five years in the south of Europe, have altogether given me an astonishing perspective of my favourite object of learning.
Remember the early months of 2001 when the DotComBubble was hissing its eventual demise, and thousands upon thousands of pensioners, investors, stockholders, and whomever were being apportioned a trauma that could somehow be contrasted with the heinous aerial attacks that were to come in September? Remember the panicking? Was there some sort of association between these two devastating occurrences? Had the DotComBubble been fed a bunch of funny money/laundered money/dirty money to such an enormous extent that stock exchanges all over the world had no choice but to halt the 1929-like insanity which was threatening the very survival of the Capitalistic System? Were the assaults in New York and Washington some kind of fluke vendetta and not the workings of a well-entrenched “terrorist organization” bent on conquering the world?
Very shortly after the horrendous acts of violence perpetrated on 11 September 2001 on one of the most prestigious pillars of the Capitalistic System and the biggest bunker in the world, Bush I, ex-Skull & Boner, ex-Congressman, ex-ambassador to China, ex-CIA director, ex-ambassador to the United Nations, ex-President of the United States, appeared on one of right-wing Italian Silvio Berlusconi’s television news programs (telegiornale), and hugging the diehard demagogue, let us know that SB was Bush I’s friend, quod erat demonstrandum, a chum of the United States of America. SB gloated and bloated. Bush I, the first stupid one and father of the second stupid one, Bush II, strained his smiles. After that, off he went.
The next day, the Corriere della Sera reported that the night before Bush I, on a private jet, had flown from Milano to—you guessed it!—Lugano, Switzerland, one of the most-visited pirates’ coves for secret banking in Europe and that pet place of moneyed, naughty Italian business people.
Miraculously inspired, I put 2 + 2 together and came up with 4. I did not, as thousands upon thousands of untrustworthy Italian businessmen and businesswomen did, put 2 + 2 together to come up with 7 or 11! The United States’ government realized from the start that it had to trace the sources of this shattering paroxysm in the Capitalistic System, and Swiss bankers were “softened” to be “persuaded” to empty their bags with the goods (secret bank account numbers and figures)—and all of them! Not only would a huge investigation begin to smoke out the executors of the 9-11 tragedy, a more considerable attempt was to be made in order to stall a possible collapse of Milton Friedman’s most prized fantasy. Much was at stake, and we all know that no holds were barred. The United States’ reaction was so vulgar, one had to construe that something more dangerous was going on—even more perilous than the causes and effects of the heartbreaking deaths of three thousand people in The Big Apple. The post-9/11 vocalizations by Bush II were filled with venom and revenge, and partially revealed to the whole world the spiteful instincts of the once somewhat respected nation. Later, actions would speak louder than words.
Italy, as usual, laid silent, almost asleep. No one picked up on the connection between the Bush I squeeze on SB and the minutely-printed blurb about the air travelling of Bush I to Schweiz. In fact, at the time I reminded myself that Italians read less newspapers than the citizens of any other country in Europe, and fifty percent of the homes in The Boot, the focolare domestico of Dante Alighieri, possesses not one book! How could Italian businessmen and businesswomen be hip to the extraordinary shakings up in process at the time? Someone had to tell them. Somebody had to reveal to them the sudden enlightenment that had befallen me from out of the blue. I volunteered.
I try to be noble. It is not easy. I have performed many acts of nobility in my life, and I am as proud as punch about them. It would not be thorny for me to be dignified at the drop of a hat. I am used to being so. My idea was simply this: To inform the off guard Italian business moguls, sono furbi, of the threat to their patrimonies, and rather than become a “co-conspirator” to their acts of profound stupidity, I would impress them with the fact that in returning their moolah to the Republic of Italy they would enjoy sleepy nights, contribute to the efficacy of their nation’s economic reputation, and help to instil in their fellow countrymen the sense that—as JFK (Ted Sorensen!) would have said—they should ask not what their country could do for them, but what they could do for their country. Wishful thinking. (When I told this story to chief accountant Giuseppe Rovelli, on trial for his alleged participation in Italy’s infamous PARMALAT scandal, his eyes bulged and, before he had changed the subject, GR flashed a very wry smile my way!) One day I feel like Robin Hood! Another day I feel like Zorro! I have never had so much fun! My dear reader, don’t you envy me?
As they say in the Suisse Alps, a “snowball effect” ensued and rather than following my advice, the characters who had indicated to me that they had secret accounts in Svizzera and those that I had suspected had, started transferring their goodies not to Italian depositories, but shifted them to other furtive bays located both in Europe and around the world. I was truly disappointed. The billions and billions of these thousands and thousands of unlawful hoarders were to remain ex patria and would never see the light of their just beginnings. What is worse, the connivers passed the word to their compatriots in the four corners of the globe—birds of a feather flock together!—and an enormous “transmission hemorrhage,” a “run” as they used to say, afflicted banks, mostly Swiss, throughout Europe and the world. (Have you ever seen the Alka-Seltzer complexion of Jean-Claude Trichet, president of the European Central Bank?) All of this…Enough! Enough!! Enough!!! Stop! Stop!! Stop!!!
Will someone please nominate me for
the “£$%&/^ Nobel Prize for Economics
and get it over with!
Authored by Anthony St. John in Calenzano, Italy
The Ides of March
MMVIII
* * *
Nice thread. Very good perception. Thanks Keiser/Stacy!
Collapse of the rigged game highly probable? When and at what pace? I will be tuned into Keiser-man, and the good folks of Keiserville.
Mike, may you get anything out of charts? Take a look at the monthly of gold. The pullback looks to be in play, BUT the “long term” trend is up bro. Keiser has it right, he in it for the long term. Maybe some “Scotch” will ease the jitters? Gold may pullback to the 1040 level, it may go lower, only the riggers know for sure. Hope you feel better Mike!
Silver for us poor people will still be a good move as well, I don’t discount Gold but the fact remains that most of us don’t have that kind of scratch to buy it.
I’m not a financial rock so silver it is for me!
Number Six: Where am I?
Number Two: In the Village.
Number Six: What do you want?
Number Two: Information.
Number Six: Whose side are you on?
Number Two: That would be telling. We want information… information… in formation.
Number Six: You won’t get it.
Number Two: By hook or by crook, we will.
Number Six: Who are you?
Number Two: The new Number Two.
Number Six: Who is Number One?
Number Two: You are Number Six.
Number Six: I am not a number! I am a free man!
Number Two: HAHAHAHAHAHA !
but it is fun to watch the banksters make millions whilst I wake up every day at 430 to work 12 hours for minimum wage. I want them to have the hottest wives, fasstest cars and best beach front property
Silver is the poor man’s gold. It is and it’s cool to have arrogant bastards like JP Morgan making us such a present. I strongly encourage JP Morgan to take 1,000,000 contracts short.
JP Morgan must be destroyed. These people are the enemy of humanity, markets and capitalism.
What do you call an economic system in which nothing has an actual value. A corporation’s value should be based only on its book value and its dividends. But none of that matters anymore. Earnings are manipulated BS and even those hardly matter now. If investment vehicle values stay coupled no matter what actually is happening then we have a strange type of planned economy existing for the benefit of the skimmers.
marc – how do you take out a bank that has infinite power to print paper fiat money?
“Simflation.” Let’s make this new term go viral.
If you dig into the corruption uncovered by the Pecora Commission in 1934, you will find that each and every mechanism that was banned or regulated (e.g., pooling arrangements, naked shorting, insider trading, etc.) as a result has since been recreated and labeled “financial innovation.” HFT recreates the false demand signals of old-school pooling arrangements. Dark pools mask supply signals. Naked shorting and insider trading are accomplished through so-called derivatives.
You also can’t miss the fact that the banks were predatory parasites in the 1920s, just as they are today. The fact that the banksters have ruthlessly targeted pension funds and municipalities should give every capitalist pause because the banksters will need bigger, richer prey to continue their drive for perpetual growth. I believe this kind of fear of the banks on the part of industrialists is what allowed FDR to pass real bank reform that diminished the banks’ influence on the economy.
Michael Hudson calls what we have financial capitalism, but I disagree. Capitalism assumes there’s capitalits on the one hand and laborers on the other, and that capitalists invest in production, benefiting both themselves and labor. Bankers provide an intermediation service and, in that sense, they’re labor. Somehow, though, we’ve manged to let the banks stand between us and our money and charge us to access and use it. At this point, we have capitalists, laborers, rentiers and speculators, but in the U.S., most capitalists have become speculators. Thus, all we really have are laborers, rentiers and speculators, and speculators are growing nervous about the rentiers. Maybe we can call this financialism or rentierism, but it isn’t capitalism of any stripe.
FSA bans and fines former Northern Rock finance director :-
http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/126.shtml
Moneyweek in the UK says it’s believes housing prices will fall 50% from their peak before they reach the floor.
@Tao – yes people have noticed the parallels and correlations to the late 1920′s and 1930′s. That decade also had a slippery slope towards global war which resulted in the creation of Israel, establishment of a new world order, and unsettled conflicts in east asia and the cold war.
People need to live their lives. There are no resolutions on the California ballot to overthrow the current government. So, we are stuck with cities and counties like Bell or Los Angeles draining the economy.
Banks have been predatory from the day the smiths made more gold reciepts thant they had gold in store..Perehaps the most relevant observation we can make is that banks only screw people if they can get away with it, and people used to be less gullible..
We need a deep banking wikileak, but chances are the public won’t get the jargon.
Well written Max Keiser.
New word for the financial dictionary; Simflation.
A new angle to the inflation deflation debate, more to think about.
The European Central Bank have a inflation mandate of 2% a year measured by the Consumer Price Index (CPI), in a deflationary environment I would assume the ECB would force the market to change in order to reach their desirable target – by all means necessary with tools like; buy assets, sell assets, bail out people, arrangements with bonds and derivatives, old fashion money printing and so on.
So if the central bank wants inflation, we’ll get inflation.
(Bernanke will even drop pallet of cash form his helicopter if needed…)
Max, did you do a google trends search on the words ‘hologram’ and ‘deflation’ before writing your article?
‘Editors watch Google to see which search terms are hot at any moment, then craft stories that will show up in response to those searches. The trick is to design stories in such a way that they will get pushed toward the top of search rankings—a black art known as “search-engine optimization,” and an area in which HuffPo excels.’
Newsweek — Has Arianna Huffington Figured Out the Future?
http://www.newsweek.com/2010/07/25/arianna-s-answer.html
@California Doctor,
I know that many have noticed similarities between now and the 1920s, but they usually stop there. Some, like Simon Johnson, go back to the 1911 Pujo Committee inquiry into the “money trust” and Brandeis’ “Other People’s Money.” That still does not go back far enough.
The roots of the Great Depression actually go back to the end of the U.S. Civil War, when bankers filled a gap in political and economic power that the South had occupied. The bankers were able to gain effective control of American industry through initial investments, access to credit and consolidation that led to monopolies and trusts. By the 1880s, industrial monopoly was big enough of a problem that it resulted in the Sherman Antitrust Act in 1890. But that legislation completely missed the involvement of the banks in creating and controlling those monopolies, and so it continued.
During the so-called Progressive Era, there were a number of attempts at reform that similarly misdiagnosed the problem as one that resided in industry and completely missed the banks’ role as de facto controller of industry. The Pujo Committee uncovered a “community of interest” between the banks and, ironically, the Federal Reserve Act was supposedly passed to combat the power of the banks, but the Fed only served to cement that power. Nothing was done about the interlocking boards of directors, access to credit, or any of the other mechanisms that the banks used to control industry.
The net result of all this was the Great Depression, and the Pecora Commission finally resulted in legislation that broke the power of the banks to control industry and, therefore, the U.S. economy.
The problem right now is people who see the parallels think that we can get away with merely turning back the clock and putting things like Glass-Steagall back into place and breaking up TBTF banks. Unfortunately, this won’t be nearly good enough because the New Deal legislation does not address the new mechanisms of Wall Street control of U.S. business, nor does it address the new kind of trans-national industrial monopolies that we currently have in place.
As we slide deeper into this depression, it’s going to become clear that meaningful reform is required, just as it was required in 1934. Our current government is only a problem to the extent that it is currently run by Wall Street and transnational monopolies, but I still have hope that this can be changed without overthrowing the government. The bottom line for me is that centralized government power is too susceptible to capture by large private interests, and that the power is going to have to be distributed to states and individual market participants (e.g. by providing them convenient low cost judicial mechanisms for regulating themselves).
The real drain on our economy in California (I live here, too) is Wall Street, the insurance companies, and the industrial monopolies, all of whom extract rents (i.e., private taxes). A greedy bastard paying himself $700K a year to be mayor of a podunk town is outrageous, but voters can do something about it. What can voters do about thousands of greedy Wall Street banksters each paying themselves millions of dollars a year for ripping us off? Yes, our government has been an accomplice to the crime, but the real perpertrators have been Wall Street. Both need to be fixed.
This spin is detritus to the real catalyst for price instability which is the decision made for a flexible yuan exchange rate at the inception of global austerity force-fed by the G8:
http://www.dnaindia.com/money/report_rbi-assessing-impact-of-flexible-yuan-on-exchange-rates-trade_1399576
It’s a game of crack-the-whip now with the sdr at fulcrum: expect a yuan constituent to be advised as necessary soon.
The drive is unmitigated to destroy the dollar/exchange valuation as an evil: as such the thread finds sustenance.
Surely one evil (multilateral exchange system) will not mitigate the disappearance of another (dollar-index-exchange system).
But we are on a ride for which the only exit is death.
I thought we had taken it as fact that there was indeed no such thing as a ‘free-market’ (probably never has been) but I concede it is necessary to complete due diligence on the academic facts as it is always good to pick thru the carcass one last time for any stray bits to feast on. In fact isn’t that the truth about markets in a nutshell… they are not free – never where… but come at a cost!
Anthony St. John: Are you 100% sure Bush is an ex-skull and boner?
@Mother Earth,
No, regular people were actually pretty much this gullible up until the Great Depression, which put them on their toes, particularly with banks. It took forty years of forgetting what really caused the Great Depression (aided and abetted by neo-feudal propagandists like Milton Friedman) before people could start being that gullible again, all in the pursuit of easy money.
Interesting link here: Natural Selection, Finance and Extinction
http://www.oftwominds.com/blogjuly10/natural-selection-finance07-10.html
@Mother Earth
I don’t ‘get’ half the jargon but I can see when I’m being fucked over and am willing to fight. The majority know they are being fucked over; the minority of them know how to fight back. How do we stoke the others to fight back is what I’m trying to figure out. How do we beat this sadistic apathy that engulfs peoples’ minds is my query. If all this majority rage was combined and put to use all this would over in no time….
….singing meadow musings…..
Boo hoo:
BP boss Hayward says he was ‘demonised’ over oil spill
“This is a very sad day for me personally,” Mr Hayward told reporters.
“Whether it is fair or unfair is not the point. I became the public face [of the disaster] and was demonised and vilified.
He added: “BP cannot move on in the US with me as its leader… Life isn’t fair.”
http://www.bbc.co.uk/news/business-10782429
@California Doctor
All things end, even JP Morgan. What’s wih you anyways Docter ? You know that these paper empires could easily be toppled OVERNIGHT. A friendly reminder. JP Morgan is a shell. It’s has nothing except political connections. Remove the political connections of these bastards in 24 hours JP Morgan would be rubble.
Tao Jonesing: I saw that article too. I concluded that the population of the United States must now be programmed to resist BP with an English accent. So replace it with a US accent and … bingo … business as usual.
@Stacy
When is the next expiration contract date ?
These criminal clowns are so redictable that it’s funny. From now on I will accumulate my physical only near expiration date.
Marc Authier: Are you sure that by removing the politicians JPM would be rubble? I suspect there are many politicians who – if you were to find some fantastic method to eliminate JPM – would cease to have any power or influence.
Firstly, max is right. Now if the powers that be can not successfully set up the SDRs in some manner to replace, albeit only temporarily, the USD to continue the ponzi, the wheels will come off the apple cart and the true deflationary depression will begin. they will tell the banks to first lend thus increasing the VEL of MONEY, equities will rise, USD will fall and the bankers will be buying the USD all the way down as you all buy the market they are selling you which they own from Nov 08. Then they will collapse the market through program trading, and since they will own the most dollars at the cheapest prices, they will back it by gold, thus once again stealing your wealth. So you have only one choice, Own GOLD and SILVER BABY. Just don’t tell anyone I told you to do it because I’ll lose my mealticket of getting paid to be a “GOLD HEIGHTA” on kitco. As for today…..OMG sell your gold people…. the sky is falling… the worthless barbaric metal is in freefall….. ahhhhhh…. I should’ve never listened to Max and bob chapman…. ahhhhh ….. mommy…. somebody change my diaper……please make it stop……suckers give up their gold, You should be buying all weakness with 3 hands.
Crazy yes that would be me, never the less I came up with the idea in making dechavanne flirt with a bimbo every day in roue de la fortune. Is he prime time every day ? Yes. Does he have his own production company and sells it to primetime TF1 ? Yes. Does the whole of france think there is was a story between them – yes – did I care ? No. I went further I spread a video of him beeing gay. We had a great laugh and we were able to spread our message primetime 7 pm TF1. Crazy yes maybe. Great freedom comes from crazyness – could be explored. Victoria beckham sounds great to me. You want more audiance or you want to play geek? Whatever I’ll obesess about something else shall I
Good piece, Max!
philippa: Did you post that comment to the blog deliberately ?
Credit Deflation UK http://global.commodityonline.com/commodity-news-Credit-Deflation-UK-20533.html
Max is right and even people who know this are a bit schizofranic about this. On one hand they know that the markets are rigged but on the other hand come out with market analyzes on the bases of these rigged markets to give their view on what’s gonna happen !?.
Inflation and Deflation, What are we actually talking about? http://forum.prisonplanet.com/index.php?topic=155961.0
My predictions in going “The Japanese Way” are correct http://forum.prisonplanet.com/index.php?topic=172945.0
yeah, it seems we are in deflation, but why then is everything I buy going up in price (medical care, college, used cars, insurance). The only thing going down in price seems to be home prices.
More essays please.
Have you ever considered that the the inflation/deflation debate itself is contrived in the same way the left (liberality – loose credit)/ right (austerity – tight credit) paradigm operates to distract people from theft, so that they waste time splitting hairs over how they are getting raped?
The hologram masks wealth transfer which is not inflation or deflation but the worst of both for the outsiders and the best of both for the insiders. The programs may be rigged, but real people siphon scads of money from this rigged system and real peole lose money from it (which the public often has to pay for – credit default swaps). The insiders are not suffering from credit contraction, they are the beneficiaries of it, as credit is still extended to them as they hoard all the illgotten gains from exiting the market at the right time and as all the money printing is funnelled via the credit default swaps into their secret accounts. This is inflationary (shadow stats) now and will be hyperinflationary soon. This is not some inevitable law, but the deliberate rocking of the economy by the powers that be. The deflation is a head fake.
That’s ‘hollow’gram. Net weight of the marker ONE gramm. Real hollow.
Holograms are cool. I made one once in a physics lab. Nowadays you can make them at home:
http://www.buzzle.com/articles/making-a-hologram-how-to-make-a-hologram.html
For some physicists, (David Bohm) the hologram is a good metaphor for and underlying order to the universe:
http://en.wikipedia.org/wiki/Implicate_and_Explicate_Order
While others think that the whole universe may be a hologram:
http://en.wikipedia.org/wiki/Holographic_principle
ps. good article on R.M.C.
marc gruber:
“yeah, it seems we are in deflation, but why then is everything I buy going up in price (medical care, college, used cars, insurance). The only thing going down in price seems to be home prices.”
Proof of deflation trumping inflation is the fact that wages are dropping (not going up) and unemployment is rising.
Price rises for various items are the result of loss of competition and monopoly pricing.
Prices in places Wal-Mart are going DOWN
wages are going down
unemployment rising
rigged market holographic pricing is fooling pundits and policy makers into a coma of inaction – either by design or default.
“california doctor
Jul 27, 2010 at 6:31 pm
marc – how do you take out a bank that has infinite power to print paper fiat money?”
Do you guys really want to know? First you send threats to all mid-level regional banking JP Morgan Chase executives all over the country, explaining that they’ll be taken out unless their upper management bosses change their tune on manipulation crimes, all of course ignored by the regulators, who were put in place by their lobbyists years ago, to make sure they can do what they’re doing. Of course then, the threats will be ignored by all at the top. Then, the threats need to start being carried out. Now you know why the founding fathers created the 2nd amendment. After a dozen or so easy-target JP Morgan Chase regional banking executives are taken down, the many mid-level executives of JP Morgan Chase will put pressure on upper-level executives to stop the manipulative crimes. It’s either that they stop the manipulation, or the mid-level executives will all leave the company in mass. And who would want to replace them, knowing their life is in danger.
The non-violent way to deal with this manipulation has been ignored. Just ask Andrew Mcguire. They put a hit out on him, and that’s obvious to all paying attention. Their action requires a much stronger reaction. And although Dimon would be a wonderful target, he’s probably very hard to get a hold of, and surely has tons of security, knowing he’s already a big target. Those mid-level executives scattered around the country surely don’t have their own private security force nor the FBI keeping watch on them, so they should be easy targets. The big question is, how many would need to be taken down before the manipulation ends? At some point they’ll realize that they make enough money even by not manipulating markets, and they’ll back off in order to preserve the lives of themselves and their families.
DISCLAIMER:
Of course I’m not planning on doing any of this, nor do I suggest that any of you do so as well. That is, unless you’ve been told by your doctor that you have just 6 months to live, with nothing to lose.