Monday, May 9, 2016

An Aperture

It does seem to be the case, that more and more is written lately (by those who should know better) about the concept of price discovery being "artificial", as if this is some recent revelation. If only these pundits had reviewed our thoughts on the matter at letthemfail.us in 2009, or here at the annals a few years later.

Learn from Another, and extrapolate those lessons onto other matters relative to the understanding. The time is LONG OVERDUE that the true power of paper money is universally understood. Paper money, a derivative, and all it's related derivatives ARE THE ITEM TRADED, not the UNDERLYING ASSET THEY REPRESENT.

Because there is NO LIMITATION to the amount or degree of fractionalization (rehypothecation) of  intrinsically worthless "derivatives" (represented only by paper claims) the functions of SUPPLY and DEMAND ... DO NOT APPLY ... TO ANY TRADED MARKET - NOT JUST GOLD.

Again:

SUPPLY AND DEMAND HAVE NO BEARING ON ANY TRADED ITEM WITH A DERIVATIVE COMPONENT ... NO EQUITY ... NO CURRENCY ... NO COMMODITY ... NO INTEREST RATE.

I do tire of the many ways I have attempted to make this point repeatedly in the past. Nonetheless, case in point - oil rises to $50 plus, as tankers clog the straights of Malaca with excess supply. In a global depression, demand falls (see Catepillar's continuing record decline). We have already built enough ghost cities on artificial demand, yet the system requires "growth" (artificial prosperity) in order to avert collapse.

Apparently, this tiny aperture of understanding is the reference point thought which all rational thought must flow before a collective understanding of what is wrong with our fiat world comes to pass. We seem to be widening that aperture ... though not quickly enough for those who have long ago passed through it.

Traders, and (ahem) "investors" (marks) should have some inkling of the problem of markets traded this way - they are anything but FREE ... for those who have privileged access to fiat (certainly not the 93.456789% or so) are able to completely annul the free market force of supply and demand at will.

I do not know how to make the many over complicated versions of this lesson, repeatedly and tiresomely being proffered, more simple and direct.

Note to Paul Mylchreest: 92-1? I think not ... more like 492 - 1 and growing. There is no end to the risk, as neither is there any risk to the end ... of this global debt's timeline ... until this aperture widens.

2 comments:

  1. Thank you! It seems that Derivatives of "everything" have really enabled manipulation of the markets and your thoughts help to better understand "price" a little better. For a novice like myself, it is so easy to forget that supply and demand have no true bearing... One wonders how this abuse of derivatives will play out.

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  2. It appears to be playing out like a Ponzi scheme, though that is an incorrect and over-used term. Markets do not make sense from a fundamental point of view so insiders are playing expectations set by the FED, and those are not working either now, so all but the elite are leaving the casino.

    The problem there is that it becomes Another's "fight among Lions (or Giants) which usually signals the end of the system, but is just one more aspect of a slowly dying system that has been on FED life support for some time.

    It is quite the entanglement, but nothing different than what we've been seeing for years, just accelerating.

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