How Markets Work

[JakeStratham]

You probably dabble in stocks or commodities. You probably know the game is rigged. You might have a tenuous grasp on the reasons, but have never taken the time to fill in the gaps.

Here's a fantastic synopsis:

Russell Blake » Distortion

Russell Blake is an author. Many of his books involve financial shenanigans at the corporate level. He's not an expert in the traditional sense (state licensure). But he's knowledgeable. He's also a very good writer who produces clear prose.

His "rant" is very easy to understand despite the complexities of the problems he addresses.

Blake starts with markets. Here are excerpts...

Supply and demand in this case is supposed to establish the price of the commodity. All good. The producer issues a contract good for, say, 100 ounces of gold, or 100 bushels of wheat, or whatever, and come time that the contract expires, is expected to deliver the product.

But that’s not how the modern commodities markets work.

Price is purely a function of how many pieces of paper a bank wants to print, knowing it won’t ever deliver anything, which radically distorts the supply/demand outlook, and hence the price. And worse yet, if the bank is called upon to deliver the commodity by a buyer who really actually wanted the commodity and not cash, it can simply say, sorry, don’t have it, here’s the cash equivalent – the price of the contract, which as we just saw, is completely artificially controlled based on pieces of paper, not the actual supply and demand of the asset.

That, in a nutshell, is how unscrupulous manipulators crater the price of stocks, making fortunes on the price decline – they flood the market with IOUs, which badly distorts supply, causing their bets on a price decline to become big money makers (it’s far easier to get folks in a theater to panic by screaming fire than to get them to buy, so this is how the real money’s made on Wall Street).

In the gold market, for instance, in China and India and Malaysia, there is often a premium paid over the paper price, because there’s simply nobody willing to sell for the paper price. That’s an example of the market breaking down – the buyers and sellers concede there’s no real basis for the artificial paper price, and so add on cash until someone’s willing to sell. We’ve seen that increasingly of late, and it’s a sign that the legitimacy of the paper exchanges is no longer assumed by actual buyers and sellers of the physical commodity.

He then shifts to governments, commodities manipulation and war (terrorism included). Here are excerpts...

Let’s look at oil prices, since those are in the news. I believe that the U.S. government, aided by their allies, the Saudis, are deliberately using low oil to punish the Russians for blocking U.S. attempts to go to war in Syria, predicated on a lie (last year’s sarin gas falsehoods propagated by the western media as truth, and later exposed as false). The U.S. really wants to go to war in Syria, in spite of the claims it doesn’t, because Syria is key to oil flow to Russia, and if the U.S. controls it, they own the Russians. Russia obviously doesn’t want them to do what they did in Libya, or Iraq, or Afghanistan, which is destabilize the region and create complete anarchy. So Russia blocked the U.S. war machine, the sarin gas reports were discovered to be as false as WMDs in Iraq were, and the U.S. looked like a bunch of liars trying to start yet another undeclared war in the Middle East.

I believe that the U.S. decided to retaliate against the Russians by doing two things: Sponsoring and supporting a conflagration in the Ukraine, wherein the democratically elected government was overthrown by a pro-U.S. de facto dictatorship, plunging Russia into a war on its border (note the media doesn’t discuss the hundreds of U.S. mercenaries on the ground in Ukraine hired by the puppet Ukraine government or the fact that most Ukrainians don’t honor the puppet government as being legit), and placing some calls to Goldman and JP Morgan and the Saudis and telling them to turn on the Xerox machine and drive the price of oil to $40. Because at that price, Russia’s currency falls apart.

Which would be the completely illegal and immoral manipulation of commodity markets to achieve political agendas of unbridled aggression.

For another bit of cheer you’ll never hear in the mainstream media, witness a recent DOJ push called Operation Chokepoint, which is where the administration bypasses Congress and the Judicial system, and effectively attempts to shut down a whole host of industries it simply doesn’t like, exactly as it tried to use the IRS to punish enemies of the administration. Coin dealers, gun dealers, fireworks dealers, payday loan places, pawn shops, all are targeted as being of heightened risk for money laundering, and the word went out to their banks that they shouldn’t really be supplying them accounts for that reason.

Which brings me to ISIS – the new boogieman.

Blake's post is long. But if you're interested in knowing how markets really work (not the PBS version), you'll enjoy it.

A word of warning: some of his conclusions near the end of his post dance on the edge of conspiracy theory. You may scoff at them. That's fine. Just thought I'd give you a heads-up about them.

Note that Blake skips over a lot of the underlying nuances of stock and commodities manipulation. I'm sure he understands them well, but refrained from weighing down his post with material that would no doubt confuse his readers.

Here's the link again.

 

[vgeek]

Michael Lewis has a few books related to financial markets that are worth reading. The Big Short & Flash Boys are entire books, and Panic is a collection of articles going back to Black Monday.

 

[rusvik]

Very interesting.

 

[infoslob]

But does Russell Blake offer up a compelling reason as to why the stock market should reorganize itself to "fairly" accommodate every Tom, Dick, and Harry that wants to turn $10k into $100k in 6 months time? The markets were created by and for big players, not for small potatoes.

The markets are not "rigged" - they just exist.

If the Grunins of the world insist on steering their own speculative ships, then perhaps visiting Caesar's Palace would be in order - where at least the flow of free drinks and comped rooms will accompany chosen fantastical worlds of chance.