"The tyranny of a prince in an oligarchy is not so dangerous to the public welfare as the apathy of the citizens in a democracy."
Montesquieu
I do not see the NSA involvement which Max mentions. It does not seem to be necessary if you have big market principals and insiders involved, able to operate in secret with the acquiescence of the regulatory bodies and exchanges. And if there is a need to obtain more specific information, the industry dominant Bloomberg terminal offer a wealth of information about how and when it is being used.
I do think there is serious fraud and abusive market rigging going on, as we have seen in LIBOR, energy, ISDA spreads, advance selling and leaking of key economic data, insider trading, Bernie Madoff, MF Global, the London Whale, and now currency markets.
There is a general disregard for the rule of law when it is overruled by 'expediency.' And the threshold for overruling it has gotten lower and lower, to whenever it is of benefit to one's friends and associates, rather than isolated to key issues of national interest. That is a corrosive condition. It is crony capitalism, and it is destructive of real economic productivity and of markets.
It is ironic that the freest exchanges of information on some of these market abuses are occurring in Asia, and in governments that have made much less pretense to transparency and freedom of information than the US and UK. They see what is coming and are making it easier for their people to protect themselves. This is because they are not beholden to the Anglo-American banking cartel.
I am sure that the Congressional hearings that would follow the 'failure to deliver' of a major bullion bank or exchange will be very impressive, full of faux anger and histrionics from outraged politicians. But like the MF Global hearings, I would expect much noise and heat, little light, and no effective redress for those who have been harmed, 'bailed-in' if you will.
I expect the whole thing, all the leverage, deception, and fraud to be swept under the rug, and the event attributed to the course of human events. The madness of crowds, practically an act of God, like the rewriting of the CDO/Housing financial crisis. It is the most likely outcome in a credibility trap. And apathy just encourages greater and bolder excesses and abuses. Greed and fraud are usually not self-limiting, but self-reinforcing. If it worked once it will work again, so keep expanding. Nothing is sacred.
Here is a reminder of the fundamentals.
