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.
And each price manufactured by computers generates a reaction price in every other security and commodity as the rigged market price signal ripples throughout the interconnected securities market around the world.
What's being masked is that the actual supply of money in the system is falling.
The major measures of money supply have all turned down. Credit has evaporated. The velocity of the multiplier effect of fractional reserve lending has disappeared. The volume of fake trades is inflating while the actual supply of money and credit is deflating.
In place of an exchange where buyers and sellers transact with each other to their mutual advantage, we now have 'Simflation,' a hologram of fake price signals masking the worst deflationary depression since the 1930's.
The only market that inches higher in real terms at the moment -- as the financial hologram and the U.S. dollar -- the fundamental economic particle of this economic hologram disintegrates -- is gold..
More Here..
Probably; when U.S companies are in good shape and profitable, this program trading shit can work; to a degree.
ReplyDeleteWhat I wonder is that when most of our companies are in trouble like they are now ( whether they admit it publicly or not ) and these damn computer traders are "making money" regardless of which way the market moves - as long as it moves ( which it has been, wildly for quite some time)
At what point does these phony "profits" start to show up for what they really are - no better than the paper their not even printed on ??
Or can they just run this game for 25 years like they ran the real estate ponzi & then move on.
What causes a "currency collapse" is that people lose confidence in the money. At some point people realize that they have been stolen from and then not only a run on the banks but they demand justice. At that point the whole Ponzi scheme implodes (see the next article below on this Blog).
ReplyDeleteThe charade will continue until after Nov 2nd. After that it is unlikely that Obama can prevent a collapse or hide the truth.
ReplyDeleteAt first: trading with stock has zero additional value to the economy. Money is just changing wallets, but makes no investments, manufacturing, etc.
ReplyDelete2nd: on deflation, yes. There's a massive stop in velocity of the money and consumers willingness to spend. I think the bigger threat is velocity, since money is changing hand much much slower.
3rd: when government will be out of cash, or foreign investors start to dump treasuries because of weakening dollar, or just a fear of default there will be no more buyers left for treasurys, just the FED
... and if there are no buyers for Government bonds, and goverment has to pay for its liabilities, than there's only 1 solution left. Printing and hyperinflation!
Just look at past hyperinflations, some of them were preceded with deflationary period, and all of them hit in just in 1-2 months, not more, from nowhere.
Just where is the economy turning around? He is a dreamer. Alot of people are still out of work how does the economy do better when people are out of work.
ReplyDeleteNot only are they out of work, they are losing their homes, becoming homeless and flat out falling through the cracks. Meanwhile, the latest afghan troop surge gets an additional 59 billion, and our gov't continues to give tens of billions of $$$ of monetary aid to other countries.
ReplyDeleteShouldn't we help fellow Americans instead?
Hyperinflation could come hyper-fast.
ReplyDeleteMore and more people are walking away from their house and loan.
More and more people are cashing out their 401Ks.
I know more and more people who have already taken most of their money out of the bank.
I hear more stories like in Mid-Michigan using alternate currency see this video
http://www.youtube.com/watch?v=JVArPiDebdY
28 trillion has been looted from the us economy over the last 2 years, this is a planned depression and collapse, say what you will, ignore this at your own doom.
ReplyDelete