Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Risk of Investing in a Markets Full of Conmen

Stock-Markets / Market Manipulation Apr 30, 2012 - 06:58 AM GMT

By: Bill_Bonner

Stock-Markets

Best Financial Markets Analysis ArticleDow up more than 100 points yesterday. Gold up $18.

Google…Apple…what more do you need to know?

“Blah, blah, blah…don’t you feel you’re wasting your time?”


Our friend was being sympathetic. She gave us a look of pity, tightly controlling her face muscles; as if it might slide into contempt at any moment. After spending so much time with rocks, dirt, cement…cattle, grapes…doing such real things, we admitted that writing about economics and finance seemed a little light. As if there is nothing real there.

“I mean, you were building things…changing the landscape…and improving people’s lives. Putting water in their houses…digging reservoirs…setting up solar power systems.”

Yes, it was true. There is the world of real things…real work and real results. And there is a whole phony world of economists…commentators…speculators…blowhards and show-offs…hustlers and conmen…fools and knaves. Wall Street…and its victims.

But while the real world is more satisfying…the phony world makes us laugh.

It shouldn’t come as a surprise that the insiders are taking advantage of the “crisis” they caused. But the scale of the rip-off…and the audacity and subtlety of it…are breathtaking.

Yes, it is fun to watch a good flimflam artist at work. And those managing the US financial system are among the best.

One day, years ago, when our office was still in the slums of Baltimore, we got a knock on the door. It was after 7pm, but we were still at our desk…

Standing in the doorway was a slender white man in blue working clothes…he looked like a mechanic or a dishwasher repairman.

“I’m so sorry to bother you,” he said with a slight Pennsylvania Dutch clip to his words. “But I saw your light on…and well, I just didn’t know what else to do.

“You see, I’m a neighbor…I work at Dunbar’s (an air-conditioning contractor) down the street.

“I hate to bother you. It’s embarrassing for me. But you see, I was working late too…everybody had gone. I realized I was the last one in the shop. So, I locked up at Dunbar’s. I was in a bit of a hurry, I guess. And so, I…I locked my own car keys and my wallet in the shop.

“I’d just call another of the employees. But I’m the only one with keys, except the boss and he’s down the ocean (a local expression for having gone to Ocean City, MD). So I didn’t quite know what to do.

“What a mess. I’m really embarrassed to be bothering you with this. But here’s the problem. It’s my wife. She’s deaf. So, I can’t call her and tell her I won’t be home tonight. I’ve got to get home or she’ll worry herself silly about it.

“I could take a bus…I live up in Pennsylvania…not too far over the line. But I locked up my wallet. I don’t have any way to pay for a ticket…”

He went on to explain that he hated to borrow money. That he’d never borrowed money before in his life.

Your editor had no money on him. So, he went to borrow it from a co-worker.

“Sounds like a lot of BS,” she said, pulling a $20 bill from her wallet.

“Oh no…he seems completely sincere,” we replied.

We gave the man the money. He added that his wife made the best apple strudel in Pennsylvania, and solemnly pledged to come back tomorrow morning with a pie as well as our money.

The next morning, we watched our watch. 8AM…not yet. 9AM…he must be waiting to take a break. 10AM…guess he’ll come over at lunchtime. At 12:30 we gave up. We repaid the co-worker, who laughed out an “I told you so.”

“Yes, I’ve been had. But you know something, it was worth it.”

A gentleman lets himself be rolled from time to time. Suspicion and cynicism are unflattering. Besides, he will spend $20 on lunch and forget it immediately. A good hustle, on the other hand, is memorable. And a good flimflam is rare and elegant.

So it is that we look on the Fed, the Treasury, and their Wall Street accomplices with admiration. They have flimflammed the entire nation… Almost 100 million households in America…and not one in 1,000 has any idea what is really going on.

And more thoughts on the greatest flimflam ever…

Pushing its key rate down to zero…the Fed gives its insider friends money for nothing. Trillions of dollars’ worth.

The outsiders reach for their wallets. They know they are being robbed, but they have no idea how…or by whom.

Instead of getting a fair return on their savings, they get practically nothing.

The idea is to force them into riskier investments. The Fed admits its strategy without shame or remorse. And it works. The poor Mom & Pop saver takes his money to Wall Street. And then, Barry Dyke author of The Pirates of Manhattan II: Highway to Serfdom explains what happens. He calls it “a biblical transfer of wealth…from Main Street to Wall Street.”

Wall Street, the mutual fund industry and corporate America has hijacked America’s savings through 401(k) retirement plans. It uses workers’ savings in 401(k)s funded with mutual funds to fuel outrageous compensation packages, fund shaky companies going public, accelerate speculation and to finance the corrupt Wall Street business model. It is an unprecedented biblical transfer of wealth from Main Street to Wall Street and corporate America. It is an unprecedented transfer of economic and investment risk onto the little guy. Main Street America has been taken to the cleaners with 401(k)s. It is a biblical transfer of wealth which will take most Americans years to recover from.

The major problem today is that there is no savings or patient capital for regular Americans. The US Commerce Department found savings to be around 1% of earnings during the 2007 housing bust, up to 8% in 2008, down to 5.8% in September 2010 and slid to 3.6% in September 2011. There is a major difference between saving and investing, but to Wall Street and the mutual fund industry the only way to save according to them is to put it into volatile highly-complex no-guarantee stock mutual funds.

Putting money into a 401(k) is NOT SAVING. It is speculating. Here’s the proof. According to the Investment Company Institute 2011 Fact Book, Americans’ have 77.4% exposure to volatile equities in their retirement accounts. That is horrific. The Federal Reserve is at the heart of this savings debacle. By dropping interest rates next to zero, The Fed has forced Americans into volatile markets in search of yield. The only winners in this tragedy are the mutual fund giants, Wall Street and corporate executives with pay packages which would make King Solomon blush. In many respects this wealth transfer is worse than the Great Depression when people were more self-reliant and had a stronger family unit.

The Fed, the federal government, bankers, government workers and highly paid executives rarely speculate with their own fortunes the way Americans are forced to speculate in their 401(k)s.

Mr. Dyke might have added that pushing money into Wall Street also pushes up prices on stocks, bonds, and other Wall Street products. At first, this makes the small investor feel smart. His ‘investments’ go up. Of course, not as much as the rich ‘1%,’ who own far more of America’s capital structure than he does.

But negative interest rates create bubbles. The Fed is now inflating its third major bubble in the last 15 years. This time, in US Treasury bonds. When it blows up, a good portion of the savings of American households – locked in pensions, mutual funds and insurance programs – gets blown to smithereens.

Then, there is consumer price inflation too. You can’t add $2 trillion to the nation’s base money supply without some effect on prices. It could take a while to show up, but it would take a doubling of consumer prices just to bring the current base money supply per person back to normal levels. And that assumes the Fed straightens up…and does no more money printing.

And who will bear the hurt? The clever elite? Those who understand the hustle? Those who own gold…houses…offices and apartment buildings? Or those whose wealth is counted out in drips and drabs…from wages and meager savings?

Oh Dear Reader…watch out!

Bill Bonner
The Daily Reckoning

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007).

http://www.lewrockwell.com

    © 2012 Copyright The Daily Reckoning, Bill Bonner - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in