SP 500 and NDX Futures Daily Charts - Non-Farm Payrolls Tomorrow

"As flies to wanton boys are we to the gods.

They kill us for their sport."

William Shakespeare, King Lear

It is easier for those who would be as a god to display their godly powers by crafting the simulacrums of life without vitality, such as asset bubbles. 

 

They lack that which is essential to create organic life and growth, which is the wisdom of love.

 

I suspect that we will see a fairly painful reckoning in the markets, probably within the next twelve months, but maybe not just yet.

While the lines of 'support' hold, the Fed has the wind at the back of the financial paper markets.

 

If you wish to know why there is no organic, broad-based recovery in the US, and probably the UK and Europe, listen to this short explanation from Elizabeth Warren here.

As you might have gathered from some of the quotes, I was rereading portions of Chesterton's book  Eugenics and Other Evils, what was then called 'scientific government.'    

I was particularly struck by one of his observations. 

“Evil always wins through the strength of its splendid dupes; and there has in all ages been a disastrous alliance between abnormal innocence and abnormal sin.”

 

What Chesterton refers to as 'abnormal innocence' is the willing naïveté of an ideology or theorists who suspend their experience and common sense to promote a particular ideal as the basis of a solution.  And of course the abnormal sin is evil, and not of the ordinary kind.  And the dupes are its deceptions.

 

In retrospect it is remarkable that he so deftly gets to the bottom of the social movements of his day, and almost predicts with stunning accuracy the adoption of mass sterilization and eventually mass euthanasia of 1930s and 1940s.

 

But we see similar examples even in our own time, if not of the same degree.  

 

The notion that people will act in perfectly good and rational ways is absurd when you say it that way.   But it is at the heart of so many of the economic theories that have plagued us in the deification of the modern markets and money in the past twenty to thirty years. 

 

This includes the massive confiscation and transfers of wealth through the abuse of financial paper, and the persecution and abuse of whole peoples and even nations through the tyranny of debts.

 

Dangerously willful delusions often open the door for great suffering and injustice.  And the irony is that they are so often enabled by the well-meaning sophistry of idealists, who would crush reality into meaningless to enable their models to roll forward with the greatest expediency.  

“I had thought of calling the next sort of superficial people the Idealists; but I think this implies a humility towards impersonal good they hardly show; so I call them the Autocrats. They are those who give us generally to understand that every modern reform will 'work' all right, because they will be there to see... And these people most certainly propose to be responsible for a whole movement after it has left their hands. Each man promises to be about a thousand policemen. If you ask them how this or that will work, they will answer, “Oh, I would certainly insist on this”; or “I would never go so far as that”; as if they could return to this earth and do what no ghost has ever done quite successfully—force men to forsake their sins. Of these it is enough to say that they do not understand the nature of a law any more than the nature of a dog. If you let loose a law, it will do as a dog does. It will obey its own nature, not yours. Such sense as you have put into the law (or the dog) will be fulfilled. But you will not be able to fulfil a fragment of anything you have forgotten to put into it.”  

G. K. Chesterton, Eugenics and Other Evils

Have a pleasant evening.

 

 

 

How Neoliberalism Survived the Financial Meltdown - 'Old As Babylon, Evil As Hell'

"Professor Philip Mirowski author of Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown, explains the intellectual history of Neo-liberalism, what Neo-liberals believe, making capitalists think differently, the role of think tanks in Neo-liberalism, the mythology of market supremacy..."

The Neo-Liberal general action pattern:

1. Create a fog of confusion about a social policy issue, its sources, and its nature.

2. Propose 'new markets' to fix the problems created by gaps or flaws in existing markets which are the language by which to define the public policy issue.

3. Build the solution as a platform to encourage phony 'entrepreneurs' to come in and expand and embed the market solution, perspective and terminology into the social structure.  Provide little to no regulatory oversight so that monopolies and predatory pricing policies protected by monopoly enrich a powerfully dominant few.

The Obama healthcare 'market' is one such example, and it is no accident that it was created by the neoliberal Heritage Foundation, before Obama made it his own.

 

Was President Obama merely being expedient in choosing such a solution?   I do not think so. I believe he is and always has been a creature of, by, and for the system and the status quo of the elite.  He aspires to be rich and powerful, and to serve he recreates himself as a brand.

 

A similar approach to the problem of stagnant economic growth and wages is to create even more new markets like the trade deals such as TPP.

 

People, plants, animals, land, happiness, work, the environment are all merely commodities to be supremely dispensed with by the gods of the markets, without interference.  Their gods price everything, but inherently value nothing, including life, love, liberty, and peace. 

 

Everything is but a transaction for the moment, without serious regard for longer term consequences or damage.  Their god is power, and their religion is greed.

 

But all the time, and this is most important, the markets that are set up are rigged by insiders of the inner temple, and are very much a part of the 'grift.'  For these are no true markets of purely rational equals, but mechanisms for transferring and accumulating wealth and power to a few.

And there is nothing wrong with markets, and market based economies, if they are honest and transparent.  But the market is soulless, and it is not an appropriate mechanism for deciding policy.   The market is a tool, not a god. And if used wisely with the proper care it can perform price discovery and capital allocation well in the right hands. But like all things, it is in the abuse of the market and the distortion of priorities that even a tool can become an instrument of disorder and abuse.

 

One of the greatest propaganda triumphs of our age is to have identified neoliberalism with 'freedom' by portraying any generally beneficial public function as a source of all evil, all difficulties because they impede the policy making action of the omniscient market, which to the people is as a god.  Instead, it is a monstrous creation, an affront to all that is human, all that is just, all that is good, that brings with it only the utmost desolation.  The madness serves only itself.

 

Like most old wickedness and folly brought forth as something new, there is nothing 'new' about Neoliberalism.  It is as old as Babylon, and evil as hell.

We think that these things take place in other times, in histories and fables, and in far off lands.  We do not see them unfolding here, playing out amongst us, in our own time and day.  But like all who have gone before and will come after, we too have been called to decide, not only in our words, but in our actions.

Do you not know, that to whom you yield yourselves as servants to obey, his servants you become, whether of a corruption unto death, or of a righteousness unto life?

 

 

Even the Best Can Fall Victim To the 'Efficient Markets Hypothesis'

The preamble to this recent column by Ted Butler (subscription but worth it for his fine work in tracking the silver market) is a discussion of how 'gold loans' are not really proper loans, because the collateral gets reformatted and sold off.

What sparks the discussion is the recent talk and articles in Bloomberg about the Gold Forwards rates being negative, implying that it is difficult to obtain leased gold. Ted finds this kind of discussion frustrating apparently.   They disclose rates, but not the amount of ongoing transactions.

I should add that to me there is little substantial difference between leases and swaps in what these fellows are doing.  That seems to be largely a manner of terminology and choice of market venue when you boil the transaction down to the essentials.

Ted explains that when you loan a tool to your neighbor, you expect to get your tool back.  In the case of gold leasing, as Bloomberg points out, the gold gets reformatted and sold off to Asia.  So the gold leasing really does not make sense to Ted.

 

Now I would beg to differ at this point, because unlike your favorite power tool monetary objects are often considered to be 'fungible' and in a lease you may not expectto get the exact bars back necessarily.  You merely ask for the same quality, form and amount as I understand it.  If this is not the case, then Bloomberg has inadvertently disclosed a massive fraud.

You don't expect to get your bars back unless it is a custodial arrangement.  But as the German people have recently discovered, good luck with that.  You may get whatever the custodians at the Fed can find, because they have not merely stored the gold for you, but they have apparently utilized it.

Therefore, Ted's reasoning goes, because they do not make sense, gold leases do not exist in any appreciable size anymore. They were just a kind of fad perpetrated by JPM and some foolish miners some years ago.  That forward selling in the form of hedges blew up badly and miners like Barrick were forced to take sizable losses in a rising market.

At this point I would say the leases do not make sense, but not for the same reason Ted cites.  They do not make sense to me because they both misprice the counterparty risk AND the terms and other details of the leasing are not disclosed to all the interested parties.  The lenders who are central banks do not inform. the public who actually own their nation's gold.  Such leasing ought to be disclosed transparently and in real time.  

But this is not the case. The lengths to which the public must go to discover the extent of the leasing of their gold has been well documented by GATA for example.

The reason I find Ted's conclusion weak, and potentially harmful, is that it is obviously based on the 'efficient markets hypothesis.'   If something does not make economic sense, it ought not to exist in an efficient market, and therefore it does not exist except as some limited anomaly.  Gold leases don't make sense to me, so therefore they do not exist, or if they do, are not significant enough to be considered.

Economists used to joke that if you told an efficient markets guy that there was a ten dollar bill lying on the sidewalk, he would reply that 'there couldn't be, because if there was someone would pick it up.'

I have asked the fellows at GATA if they have any firm numbers on current gold loans out, primarily from central banks.  I know this is an ongoing quest because central banks are notoriously reticent to providing any such details of their activities. 

We know leasing exists, we know the rates, we just do not know the details of the size of the market and the extent of the deals.

I found this column to be of concern because Ted is a very well respected analyst.  I read his columns regularly and like him quite a bit.  So I do not wish this to seem to be overly critical.  And I realize that it might seem that I am trivializing his argument, but this is the heart of it. 

Ted has been quite vocal in asserting that JP Morgan et al. have been manipulating the silver market based on what he has seen at the Comex.

But I did want to take the time to point out that a) gold leasing is not like lending out a specific object and b) just because something does not make economic sense to you, does not mean it is not happening.   His argument is not based on any new data, but rather dismissive of something because there is no 'smoking gun' available, only circumstantial evidence. 

These markets and this financial system is all too often the story of all control frauds and bubbles, and misappropriation of others people's money and goods.  Lots of things don't make sense to the rational, honest mind anymore.   Many of the financial deals that cities, counties and nations engaged in that cost their people hundred of millions of dollars made no economic sense.  But there they are.

The efficient markets hypothesis has been used to justify an enormous amount of financial fraud and bad policy decisions over the past thirty years. It is the mother of frauds, from MF Global to Enron to Madoff to the Housing Bubble.

These are smart and important men.  They are far too rational and god-like, your betters, to do things that you would not even think of doing.  They are 'the System.'

Given the extent of the frauds and riggings, I am often tempted to think these days that if there is money to be made at it, if it is being conducted in secrecy, and if it involves other people's property, people who are relatively unheard and powerless, it probably does exist.  But I prefer to stick to the facts, even if it is a plodding and sometimes frustrating path.

 

GATA was kind enough to provide this link to more recent news below.  What do you think they mean by 'actively managing their gold reserves?'   Moving the bars around and dusting them off?

 

If the world 'leasing' troubles you, think about OTC swaps.

 

Related:  Central Banks More Actively Managing Their Gold Reserves

Ted Butler's column of Nov 19 - Popular Misconceptions

"Gold loans are fraudulent through and through, because the real owners don’t get the proceeds when the sale is made and the collateral ends up with an unrelated third party who has no obligation to return the metal. But because they appeared to work for a while, otherwise intelligent people overlooked the obvious fraud and collected the benefits while they were available. Today, those tracking gold loans report the amounts of these loans outstanding are down 95% from levels at the peak around the year 2000. For me, I can’t figure out how even 5% of these loans could still be in existence.

That’s why I’m skeptical about all the talk of GOFO and gold lending as who in their right mind would ever loan or borrow metal under the circumstances I’ve described? There are few, if any, documented instances of specific loans and the parties involved or to the purpose of these loans. I suppose it might make sense to be a borrower if one intends to default on the loan, but that’s hardly legitimate. Likewise, I suppose a central bank might lease metal if there was an illegitimate intent to depress prices, but that couldn’t be discerned from GOFO rates.

Therefore, I think all the articles and commentary about GOFO are still goofy and unproductive. It seems akin to some deep debate by religious philosophers during medieval times about how many angels can dance on the head of a pin. I’m not trying to be insulting, because I believe there is a negative side to the current discussion about gold loans and lending rates that would be eliminated if the discussion ended once and for all. There is somewhat of a common denominator in the debate over gold lending in that most reporting on GOFO appear to be staunch believers in the ongoing gold and silver price manipulation. It is also well-known that those who insist that there is an ongoing manipulation in silver and gold (like me), are considered to be fringe conspiracy theorists. I think that is somewhat earned because so many who believe in manipulation tend to espouse other conspiracy theories (definitely not me). "

Lawsuit: CME Futures Market Creates 'Guaranteed Winners and Guaranteed Losers'

How appropriate that this morning Bart Chilton is appearing on Bloomberg TV with Terry Duffy, President of the CME, laughing it up with the 'news anchors' about 'Why Today's Markets Are Better Than Ever.'

I suppose that the US markets of today are quite efficient and effective. 

The public may just not understand in 'what way' they are intended to be efficient.

And may the odds be always in your favour.

This is a very brief excerpt of a well written story from Wall Street On Parade.

You may read it in its entirety here.
 

Lawsuit: Chicago Futures Market Creates “Guaranteed Winners and Guaranteed Losers”
By Pam Martens
November 6, 2014

Last week three futures traders told a Federal court in Chicago that it’s not just the high frequency trading firms that are reaping a windfall but the exchanges who are engaged in a conspiracy with them to create guaranteed winners and guaranteed losers...

But what Judge Charles P. Kocoras has been hearing in this case for months are these hair-raising charges of 'clandestine contracts' between the futures exchanges and high frequency traders; that the exchange is giving high frequency traders early peeks at data before the rest of the market under a process known as the 'Latency Loophole'; and that potentially as much as 50 percent of the trades on the exchange are 'wash trades.'

PBS Frontline: To Catch a Trader

“The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least to neglect, persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.”

Adam Smith

Got inside trading information?

Got a co-located high speed trading server?

Got a privileged position of trust in society or even better, in the game itself?

Then buddy, you got edge.

Related: The Taming of the Trading Monster

Lessons From the Panic of 1907

I have just finished reading The Panic of 1907: Lessons Learned from the Market's Perfect Storm, written by Robert Bruner and Sean Carr in 2007. It is an extraordinarily well documented, step by step study of one of the worst bank panics and stock market crashes in modern times.  The broad stock market declined 37% from peak to trough in less than 15 months.

Here is an extended quote from the authors' closing remarks.

"Why do markets crash and bank panics occur? Any single case study, such as the one we have presented here, is subject to a range of interpretations, and we encourage the reader to draw one's own conclusions from the foregoing narrative.

Yet we think that the story of the panic and crash of 1907 inspires consideration that major financial crises can be the result of a convergence of certain unique forces - the forces of the market's perfect storm - that cause investors and depositors to act with alarm.

The recounting of the events of 1907 suggests that the storm gathers as follows.

It begins with a highly complex financial system, whose very complexity makes it difficult for anyone to know what might be going wrong; by definition, the multiple parts of the financial system are linked, which means that trouble in one institution, city, or region can travel easily and quickly to others.

Buoyant growth in the economy makes the financials system more fragile, in part due to the demand for capital and in part due to the tendency of some institutions to take on more risk than is prudent.

Leaders in government and the financials sector implement policies that advertently or inadvertently increase the exposure to risk of crisis.

An economic shock hits the financials system. The mood of the market swings from optimism to pessimism, create a self-reinforcing downward spiral. Collective action by leaders can arrest the spiral, though the speed and effectiveness which they act ultimately determines the length and severity of the crisis."

My own reaction to the Panic of 1907 which they document so well is similar, except for a different emphasis on certain factors and a slightly different slant on their development, based on my own extensive readings about other panics and crashes, including a first hand look at the tech bubble collapse of 2001.

First, almost all panics and crashes are preceded by sustained periods of artificial growth, not based on improvements in productivity, but by a false expansion in the money system, aided and abetted by speculators and financiers. Although they do not act in overt cooperation, yet there is an unmistakable collusion of purpose. It suggests that the impulse to benefit in this way is present in a portion of the people at all times, as there are impulses to do many other things for personal benefit without regard to the public good. But at certain times the prohibitions which normally hold this behaviour in check are weakened, sometimes through active interventions against regulation, at other times from a decline in moral conscience.

Seocnd, almost all panics and crashes involves relatively small groups of people who seem to be at the heart of the matter, and are closely interlinked into small cartels of corrupted self-dealing involving the accumulation of enormous personal fortunes. One is struck by the interconnectedness of the primary players in the Panic of 1907 in each others companies, banks, investments, and boards of directors.

In this instance there did not seem to be any significant corruption of the government, which was actually in a progressive mood under Theodore Roosevelt, although he was by now a lame duck. Rather, the central government at this time was weak, and regulation was largely in the hands of the business principals, of which no greater example than J. Pierpont Morgan. They will act to protect their own interests when threatened, but their benevolent reputations are greatly exaggerated.

Lastly, there is always the overextension of credit and excessive leverage. Always. This is how any Ponzi scheme grows.  In every case this is what precedes and precipitates the growth of a crisis and panic - the unreasonable overvaluation and expansion of assets precipitated by a relatively small number of men, interlinked loosely through business associations and personal financial gain.

As in the case of 1907 and its aftermath, a few visible persons are offered up for punishment and destruction, but the largest and most substantial of the predators remain unscathed, often being lionized as saviours who attempted the rescue of the nation from a few bad apples and the public from its own folly.

Although the authors make a great deal of the need to take swift and decisive action to stem the crisis, they miss the point that the place to stop this is before the leverage and excess build to the point where almost anything will set the overextended system into crisis and panic. Even if decisive action is taken, it is the greater public that is invariably harmed by the cure, with a few becoming even more enriched, although the harm be less than if nothing had been done at all. By the time the crisis is underway, you will be making deals of convenience, and at terms with the devil.

It should be stressed that there is no evidence in the correspondence of any of the principals that they desired to cause this Panic of 1907 for their own benefit. And there does not have to be.

If a general atmosphere of looting is fostered by the provocations of a few like-minded individuals, their subsequent actions need no coordination, other than the insufficient response of society to stop them before they gain sufficient momentum from their desires. It is the apathy and weakness of the many that provides the stimulus and the encouragement for their plans.

The authors recount the subsequent meeting of many of the principals at Jekyll Island in 1910, to craft a reform of the banking system to be later known as The Federal Reserve System.

I do not see anything in the system itself that is improper or malignant; it is only in it ability to increase and amplify leverage in secret and without equanimity that makes it a powerful tool for like-minded individuals to seek to defraud the many of their life savings through unscrupulous abuse of anything and everything that comes under their power and control.

If you wish to take the measure of a society, look to how its weakest members are protected from its strongest, and its predators skulking at the fringes.

More concisely, you will receive the results that you incent, the behaviours that you cultivate, the society that you promote, if only by doing nothing and allowing small groups of like-minded individuals to set your greater agenda. We have seen this repeatedly in companies both large and small, in entire industries, and we think in the national economy.

If you wish a hell on earth, do nothing for the benefit of others, for the greater good, or to inhibit those who act solely out of greed, fear, and hate. Soon enough you will have a society that is intensely self-interested, self-concerned, superficial, destructive and self-consuming.

A free and just society is not a prize to be won or a gift that can be bestowed; it is a recurring commitment, and an enduring obligation.

This is a reprise of a blog entry originally published here on 5 July 2008.  It seems remarkably appropriate today.

That such economic disaster is promulgated by official corruption and the general belief that morality and justice are merely quaint notions is nothing new.   If you have not done so you might read A. H. Beasley's description of Rome prior to the rise of the Gracchi brothers, Marius and Sulla, which I included in a recent blog entry here.

SP 500 Futures Intraday - You Can't Follow the Opera Without a Libretto

This is from my post earlier today at 11:17 AM.

"I may adjust my outlook if the September SP 500 futures do not hold at 1518 which is the 50% Fibonacci retracement level. Right now we are at 1553 which is about a 38.2% retracement from the highly controlled, almost straight line rally that began at the beginning of the year."

Here is what the futures market looks like now in the chart below.   This market is trading on the technicals. 

Technicals is sometimes a euphemism for calculated insider manipulation, as in a 'wash and rinse.' You convince the small investor to get in despite their fears at some higher price, and then one pulls the rug out from under them since the entire rally has been manufactured, and buy the same paper back on the cheap, thereby skinning them once again.

Some of this is herd instinct with the smaller traders, but the big dogs at the Banks and funds are setting the tone in this trade with all the passion of a McCormick reaper.

This is the norm for deregulated or under-regulated markets, a far cry from the 'efficient markets theory' which is a canard. This was standard operating procedure in the 1920's before reforms were introduced.

If you do not believe this happens, if you do not believe that traders signal each other of their intentions, if you do not know that the big trading desks watch the structure of the market as in who is holding what and then act on it,  if you do not understand that the financial sector is being recapitalized by looting the real economy,  then you may be either a shill for the house, witting or not, or one of the suckers at the table.

"It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Upton Sinclair

We may have more downside to the 50% retracement, and it could be more IF something real happens.  That means something real, something fundamental, and not a manufactured event off some mild Fed jawboning. 

But in my opinion everything that has occurred since Bernanke's non-statement last week has been the second act in this opera buffo known as the US financial markets. 

Some Thoughts on the Forex Rigging Scandal and Market Manipulation

The foreign exchange rigging scandal that is coming to light is very interesting, even in this time of financial scandals and corruption.

Here is the original Bloomberg story on it and you may wish to read it in its entirety.

The corruption in the enormous global foreign exchange market is coming to light not because of any surveillance by regulatory bodies. The multi-trillion dollar market is a genuine 'spot market' and is not considered a financial assets market, and is therefore lightly regulated.

As you may recall,  a certain liberal economic columnist asserted some years ago that it was not possible to rig the price of commodities using the futures market because the price is set in the spot market.  Well, he was wrong about that, since in those cases the spot price is a derivative of the front month in the futures. 

But with forex we do have an actual spot market, and apparently that principle does not hold even where there is an actual spot market, and of a size that most would assert that price fixing was not possible.  They forget that prices are set at the margins.

Efficient market theory dies hard because it is such a nice neat model and so attractive to the abstract mind.  That it is a mere fantasy is another matter.

The story came to light because very large customers went to the regulatory body in London and complained that they were tired of being cheated. The authority was forced to respond.

There is quite a bit of talk that nothing that was done was 'illegal.'

While that may be technically true from a regulatory perspective, there is sufficient evidence that traders from different companies were acting in concert to fix global benchmarks knowing with the intent to steal from their customers. If that is not the very definition of a criminal conspiracy I am not sure what would be.

And finally, despite its enormous size, the foreign exchange market was able to be rigged against customers because of the concentration of market power in a few hands, and the manner in which trades are placed, taken and executed.

From the Bloomberg story:

"While hundreds of firms participate in the foreign-exchange market, four banks dominate, with a combined share of more than 50 percent, according to a May survey by Euromoney Institutional Investor Plc.

Deutsche Bank AG (DBK), based in Frankfurt, is No. 1, with a 15.2 percent share, followed by New York-based Citigroup Inc. (C) with 14.9 percent, London-based Barclays Plc (BARC) with 10.2 percent and Zurich-based UBS AG (UBSN) with 10.1 percent."

We do not know what entities have been named in these revelations. These are merely the largest. We may never know depending on how the London regulators choose to dispose of it.

But it does shoot a gaping hole in the efficient markets theory. Here is a huge, widely dispersed market with literally millions of transactions affecting almost every economically involved individual in the world, and it became a chronically rigged market in a corruption scheme that went on for many, many years.

Put that in your free market neo-liberal pipe and smoke it.

I see where Singapore's regulator was threatening to reprimand the guilty parties. I submit that given the wide range of abuses and scandals that have been revealed and which are still ongoing, that there needs to be some serious action and soul-searching done about how markets are set up, what secrecies are permitted to the major players, the asymmetric distribution of information, and the invariable and pernicious, official sanctioned secrecy that marks every single financial fraud which we have seen over the past twenty years.

Secrecy is a privilege that has a limited place in markets that are honest, efficient and effective.

And I am sorry but if you still choose to believe that the markets, even very large and significant ones, are not being routinely rigged to the disadvantage of the public, then you are probably a fool, or a tool, or an obtuse, purblind ideologue.  

And that goes in spades for the precious metals and equity markets that are saturated with outsized position shoving, event driven price rigging, collusion, and high frequency front running as a normal order of business.

Banks Manipulating Trades and Rigging Benchmarks in Foreign Exchange Markets

Are there any markets that have not been corrupted by lax regulation, and as a consequence by Banks who have been emboldened in their insatiable greed by the lack of effective enforcement of the rules and equal justice for all?

It is somewhat ironic that this news of routine price rigging comes on the revelation that Obama is replacing Gary Gensler, Chairman of the CFTC, for being too aggressive in seeking to regulate the Swaps markets and angering some foreign banks (read London trading operations of the big multinational banks). 

London has become a favored haven for corrupt financial practices such as 'the London Whale.'

I will suggest to you that this is still just the tip of the iceberg.  And for those who assert that there is no manipulation in the precious metals markets, despite all the odd price action and blatantly predatory selling raids, I would suggest that they are obviously lacking in something, exactly what I cannot say.

There will be no sustainable recovery until the impediments to honest price discovery and the pernicious tax of corruption is eliminated through greater transparency, equal enforcement of existing laws, and serious reform. 

One can seriously wonder how confident they can be that the governments of the US and the UK, and of Europe as well, are seriously committed to performing the basic function of maintaining honest markets for their constituents.  If market confidence breaks, there will be hell to pay.

Even if they hide and tolerate this corruption for the sake of 'confidence, ' markets have a significant role to play in the economy.  That function has become warped and perverted through corrupt practices, with serious real world results, which accumulate and worsen over time, with consequences that we have yet to discover.

Breaking News from Bloomberg:

"Traders at some of the world’s biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice.

Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.

The behavior occurred daily in the spot foreign-exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, the two traders said. The Financial Conduct Authority, Britain’s markets supervisor, is considering opening a probe into potential manipulation of the rates, according to a person briefed on the matter..."

David Cay Johnston: On Crony Capitalism, Control Frauds, and the Gods of Greed and Power

David Cay Johnston is an investigative journalist and author, a specialist in economics and tax issues, and winner of a 2001 Pulitzer Prize.

Since 2009 he has been a Distinguished Visiting Lecturer who teaches the tax, property and regulatory law of the ancient world at Syracuse University College of Law and Whitman School of Management.

Why have you never heard of David Cay Johnston or his ideas before? Why is he almost never interviewed on the mainstream media.

Because in times of general deception, telling the truth is a revolutionary act. And we are in those times, and are caught in a credibility trap.

It is not the same as a coup d'état, but has many of the same appearances and characteristics.

It is the convergence of like minded kleptocrats and the amoral careerists who support whatever status quo that happens to exist. It is the banality of the willing functionary and the bureaucrat, and the inability of a moral center to withstand it.  

Neither austerity or stimulus will work until there is meaningful reform.

Strangers Among Us: The Fatal Allure of False Premises and Unstable Systems - I Am Fishead

People tend to think other people are like them: imperfect, but generally striving to be good.  Faithful in the important things, but weak and error prone in the small.  Our self-view itself is probably a bit of a self-serving self-delusion, but that is a topic for another conversation on some other day. But it does illustrate the need for some external standard, and the rigor of self-examination against it.

As you may have heard or observed, most people tend to write their own faults in water, and carve the failings of others in large letters written in marble.

But there are strangers among us, people who are quite different from most in how they approach things. In fact, the variance amongst people is greater than most will allow in their thinking. Not all people are constructed in the same way.

There are those who are not at all self-regulating in the rational way in which we would like to think we all are.   They may be different genetically, or from the way in which they grew up in their formative years, and most often a combination of both. 

But as in so many cases,  generalizations can lead to convenient assumptions, and those can often prove dangerous.  This can cause us individual problems, as anyone who has dealt with a family member or associate who has a serious problem will know.

But the greatest source of mischief, and too often tragedy, is when we design social constructs and commercial organizations that, for the well-intentioned sake of simplicity, assume that people are rational and reliably good, except for a small and easily identifiable minority of physical criminals.

This may sound obvious enough, but in fact such mistaken assumptions can and do happen.  Certain financial and economic formulations of risk for example, are laughable in their assumptions, but nevertheless obtained widespread acceptance and recognition, before it failed miserably.  Why? For a number of reasons, most of which have to do with practical convenience of thought that gets carried too far.

 People thinking in groups tend to eschew individual common sense, relying instead on a sort of shorthand 'group think' that substitutes for experience and the hard work of individual reason.   We are both emotional and thinking beings, and have our roots in pack behaviour and tribalism. 

The 'tell' for this phenomenon is that when confronted with contrary evidence from real life, they either studiously ignore it, citing largely irrelevant counter examples from biased and carefully chosen sources, or merely brush it aside, falling back on generalizations and above all slogans. And when harsh reality inevitably intrudes, it is met with shock, stubborn resistance, and disbelief.

So, and this is the point of this essay, when thinking about social or corporate organization, bear in mind that there are a small but potentially powerfully focused set of people who will not fall into your neatly reasoned assumptions. And this fact may cause your system to be founded on sand, on a fatal flaw, that may even be promoted by those who view it to their advantage in undermining and abusing that system for their own ends.   This is why they prefer to redesign and reorganize completely instead of reform.  It provides a greater opportunity to construct new loopholes for their own benefit.

No one can make a reliable diagnosis at a distance. We tend to distort and project when observing others. And people operate from a variety of motives and intentions. But that is not the point.

The point is that systems must be designed to be, what Taleb has called, 'anti-fragile,' that is, not so reliant on certain assumed norms to be vulnerable to corruption and collapse. In system design we used to call an effective system that was even incidentally reliable at the stated extremes to be 'robust.'

I believe quite strongly that the story of our own crisis is the failure to remember the lessons from the past, that there are people whom it would be fair to call evil amongst us, an that although they may be intelligent and superficially charming, they are every bit as dangerous, and probably even more, than the killer who wields a knife or a gun. And more than anything else, we have ceased to love the truth, for the sake of winning.

“Above all, don't lie to yourself. The man who lies to himself and listens to his own lie comes to a point that he cannot distinguish the truth within him, or around him, and so loses all respect for himself and for others.

And having no respect he ceases to love.”

― Fyodor Dostoyevsky, The Brothers Karamazov

And that is the descent into Hell.

Here is a brief excerpt from an essay put out by Aftermath, the group founded in part by Robert Hare to assist the victims of psychopathy. It is not intended as a diagnostic tool, because without years of specific training one is not capable of performing such a procedure reliably. But it is educative, to help us to understand that not everyone is the same, not like 'us' if such an 'us' really exists except in broad abstractions.

Below that, for your holiday viewing, I reprise the documentary film, I am Fishead.

Enjoy, and plan accordingly.

"There is a class of individuals who have been around forever and who are found in every race, culture, society and walk of life. Everybody has met these people, been deceived and manipulated by them, and forced to live with or repair the damage they have wrought.

These often charming, but always deadly, individuals have a clinical name: psychopaths. Their hallmark is a stunning lack of conscience; their game is self-gratification at the other person’s expense. Many spend time in prison, but many do not. All take far more than they give.

The most obvious expressions of psychopathy, but not the only ones, involve the flagrant violation of society’s rules. Not surprisingly, many psychopaths are criminals, but many others manage to remain out of prison, using their charm and chameleon-like coloration to cut a wide swathe through society, leaving a wake of ruined lives behind


Key Symptoms of Psychopathy

Interpersonal Emotional	Social Deviance
Glib and superficial	Impulsive
Egocentric and grandiose	Poor behavior controls
Lack of remorse or guilt	Need for excitement
Lack of empathy	Lack of responsibility
Deceitful and manipulative	Early behavior problems
Shallow emotions	Adult antisocial behavior

Glib and Superficial

Psychopaths are often voluble and verbally facile. They can be amusing and entertaining conversationalists, ready with a clever comeback, and are able to tell unlikely but convincing stories that cast themselves in a good light. They can be very effective in presenting themselves well and are often very likable and charming...

Egocentric and Grandiose

Psychopaths have a narcissistic and grossly inflated view of their own self-worth and importance, a truly astounding egocentricity and sense of entitlement, and see themselves as the center of the universe, justified in living according to their own rules...

Psychopaths often claim to have specific goals but show little appreciation regarding the qualifications required-they have no idea of how to achieve them and little or no chance of attaining these goals, given their track record and lack of sustained interest in formal education...

Lack of Remorse or Guilt

Psychopaths show a stunning lack of concern for the effects their actions have on others, no matter how devastating these might be. They may appear completely forthright about the matter, calmly stating that they have no sense of guilt, are not sorry for the ensuing pain, and that there is no reason now to be concerned...Their lack of remorse or guilt is associated with a remarkable ability to rationalize their behavior, to shrug off personal responsibility for actions that cause family, friends, and others to reel with shock and disappointment. They usually have handy excuses for their behavior, and in some cases deny that it happened at all.

Lack of Empathy

Many of the characteristics displayed by psychopaths are closely associated with a profound lack of empathy and inability to construct a mental and emotional “facsimile” of another person. They seem completely unable to “get into the skin” of others, except in a purely intellectual sense. They are completely indifferent to the rights and suffering of family and strangers alike. If they do maintain ties, it is only because they see family members as possessions...

Deceitful and Manipulative

With their powers of imagination in gear and beamed on themselves, psychopaths appear amazingly unfazed by the possibility, or even by the certainty, of being found out. When caught in a lie or challenged with the truth, they seldom appear perplexed or embarrassed-they simply change their stories or attempt to rework the facts so they appear to be consistent with the lie. The result is a series of contradictory statements and a thoroughly confused listener. And psychopaths seem proud of their ability to lie...

Shallow Emotions

Psychopaths seem to suffer a kind of emotional poverty that limits the range and depth of their feelings. At times they appear to be cold and unemotional while nevertheless being prone to dramatic, shallow, and short-lived displays of feeling. Careful observers are left with the impression they are playacting and little is going on below the surface. A psychopath in our research said that he didn’t really understand what others meant by fear.

Impulsive

Psychopaths are unlikely to spend much time weighing the pros and cons of a course of action or considering the possible consequences. “I did it because I felt like it,” is a common response. These impulsive acts often result from an aim that plays a central role in most of the psychopath’s behavior: to achieve immediate satisfaction, pleasure, or relief.

So family members, relatives, employers, and coworkers typically find themselves standing around asking themselves what happened-jobs are quit, relationships broken off, plans changed, houses ransacked, people hurt, often for what appears as little more than a whim...

Poor Behavior Controls

Besides being impulsive, psychopaths are highly reactive to perceived insults or slights. Most of us have powerful inhibitory controls over our behavior; even if we would like to respond aggressively we are usually able to “keep the lid on.” In psychopaths, these inhibitory controls are weak, and the slightest provocation is sufficient to overcome them. As a result, psychopaths are short-tempered or hotheaded and tend to respond to frustration, failure, discipline, and criticism with sudden violence, threats or verbal abuse. But their outbursts, extreme as they may be, are often short-lived, and they quickly act as if nothing out of the ordinary has happened...Although psychopaths have a “hair trigger,” their aggressive displays are “cold”; they lack the intense arousal experienced when other individuals lose their temper.

A Need for Excitement

Psychopaths have an ongoing and excessive need for excitement-they long to live in the fast lane or “on the edge,” where the action is. In many cases the action involves the breaking of rules. Many psychopaths describe “doing crime” for excitement or thrills... The flip side of this yen for excitement is an inability to tolerate routine or monotony. Psychopaths are easily bored and are not likely to engage in activities that are dull, repetitive, or require intense concentration over long periods.

Lack of Responsibility

Obligations and commitments mean nothing to psychopaths. Their good intentions-”I’ll never cheat on you again”-are promises written on the wind. Horrendous credit histories, for example, reveal the lightly taken debt, the loan shrugged off, the empty pledge to contribute to a child’s support. Their performance on the job is erratic, with frequent absences, misuse of company resources, violations of company policy, and general untrustworthiness. They do not honor formal or implied commitments to people, organizations, or principles. Psychopaths are not deterred by the possibility that their actions mean hardship or risk for others.

Early Behavior Problems

Most psychopaths begin to exhibit serious behavioral problems at an early age. These might include persistent lying, cheating, theft, arson, truancy, substance abuse, vandalism, and/or precocious sexuality. Because many children exhibit some of these behaviors at one time or another-especially children raised in violent neighborhoods or in disrupted or abusive families-it is important to emphasize that the psychopath’s history of such behaviors is more extensive and serious than most, even when compared with that of siblings and friends raised in similar settings...

Adult Antisocial Behavior

Psychopaths see the rules and expectations of society as inconvenient and unreasonable impediments to their own behavioral expression. They make their own rules, both as children and as adults. Many of the antisocial acts of psychopaths lead to criminal charges and convictions. Even within the criminal population, psychopaths stand out, largely because the antisocial and illegal activities of psychopaths are more varied and frequent than are those of other criminals. Psychopaths tend to have no particular affinity, or “specialty,” for one particular type of crime but tend to try everything. But not all psychopaths end up in jail. Many of the things they do escape detection or prosecution, or are on “the shady side of the law.” For them, antisocial behavior may consist of phony stock promotions, questionable business practices, spouse or child abuse, and so forth. Many others do things that, though not necessarily illegal, are nevertheless unethical, immoral, or harmful to others: philandering or cheating on a spouse to name a few..."

The Charming Psychopath: How to Spot Social Predators Before They Attack

Clive Boddy: Two Papers on the Destructiveness of Psychopathy in Business and Government

"The schools would fail through their silence, the Church through its forgiveness, and the home through the denial and silence of the parents. The new generation has to hear what the older generation refuses to tell it...For evil to flourish, it only requires good men to do nothing."

Simon Wiesenthal

While there are always a certain small portion of the population who have the sorts of destructive bent as described here, normally society acts to restrain them and their more vile impulses.

However, from time to time, the small percentage can gain enough power through ruthlessness and deception to foster an atmosphere that not only tolerates their excesses, but actually holds them up as an example for the young as well.

I think some of this is the winner's curse. A society that enjoys a long period of prosperity begins to think of itself as exceptional. They become so enchanted with who they think they are, that they just simply forget their own past, and begin to believe in myths and illusions. And human memory and education being what they are, they fall victim to the frauds and deceptions and darker impulses that have plagued them in the past.

Conversely, a society that has been through a series of terrible ordeals can often become simply desperate, almost bestial. They make take a similar path but much more cynically. It is not that they are deluded, they simply do not care.

When the power of greed in business finds a suitable match in the lust for power in the political arena, that partnership can seem almost unstoppable for quite some time. It becomes increasingly difficult to effect reform from within because so many of the more effective elements of society become corrupted and cynical to the point of apathy.

In a word, the governance of society becomes an organized hypocrisy engaged in systematic destruction, of not only others but also of society itself, especially as the others either resist more effectively or collapse from sheer exhaustion.

As I have mentioned before, in discussing this with some older fellows who have a bit of a broader personal perspective, and in reading deeply in history and its cycles, it seems as though the West entered into such a cycle, in the 1980's. It is merely reaching its full flower today.

The consequences on society as a whole, if history is any guide, will be profound, even moreso than we have seen so far.

The Implications of Corporate Psychopaths for Business And
Society: An Initial Examination And A Call To Arms
By Clive Boddy

Corporate Psychopaths are managers with no conscience who are willing to lie and are able to present a charming façade in order to gain managerial promotion via a ruthlessly opportunistic and manipulative approach to career advancement.

What the implications of their presence in business organisations are is an area that is relatively new to the area of business and behavioural research. However the presence of Corporate Psychopaths has several implications for work in business research. This paper reviews the concept of Corporate Psychopaths, describes how they may theoretically be present in organisations at senior managerial levels in much larger numbers than their approximately 1% incidence in the general population would suggest and discusses the implications of this for business and society.

The paper defines Corporate Psychopaths as those people working in corporations who are self-serving, opportunistic, ego-centric, ruthless and shameless but who can be charming, manipulative and ambitious. It reviews the recent series of papers and news articles on Corporate Psychopaths and discusses how and why Corporate Psychopaths are drawn to corporations as sources of power, prestige and money. The paper suggests that Corporate Psychopaths are a threat to business performance and longevity because they put their own interests before those of the firm. It also discusses how they are a threat to the development of a sense of corporate social responsibility because they have no sense of guilt, shame or remorse about the consequences of their decisions...

Read the entire paper here.


Journal of Business Ethics
The Corporate Psychopaths Theory of the Global Financial Crisis
By Clive Boddy

An understanding of Corporate Psychopaths as expressed in a recent series of papers in this journal and in others, and based on empirical research, has helped to answer the question of how organizations end up with impostors as leaders and how those
organizations are then destroyed from within (Boddy, 2005, 2010a, Boddy et al., 2010a, b).

The event of the Global Financial Crisis has hastened an already changing climate in business research. Commentators are no longer willing to assume that all managers are working selflessly and entirely for the benefit of the organization that employees them, and the study of dark, dysfunctional, or bad leadership has emerged as a theme in
management research (Allio, 2007; Batra, 2007; Boddy, 2006; Clements and Washbrush, 1999).

The onset of the Global Financial Crisis has thus led management researchers to be increasingly interested in researching various aspects of dark leadership in an
attempt to explain the current financial and organizational turmoil around the world. Numerous papers on dark leadership have, for example, been recently reviewed by this author for this journal and it is evident that there are commentators with a deep
knowledge of individual types of dark and dysfunctional leadership and with views on how these people have contributed to the current crisis.

Corporate Psychopaths are one such type of dark manager, and this paper investigates their possible influence on the companies involved in the Global Financial Crisis. This is important because when large financial corporations are destroyed by the
actions of their senior directors, employees lose their jobs and sometimes their livelihoods, shareholders lose their investments and sometimes their
life savings and societies lose key parts of their economic infrastructure. Capitalism also loses some of its credibility.

These corporate collapses have gathered pace in recent years, especially in the western world, and have culminated in the Global Financial Crisis that we are now in. In watching these events unfold it often appears that the senior directors involved walk away with a clean conscience and huge amounts of money.

Further, they seem to be unaffected by the corporate collapses they have created. They present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings, and investments, and as lacking any regrets about what they have done.

They cheerfully lie about their involvement in events are very persuasive in blaming others for what has happened and have no doubts about their own continued worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.

Many of these people display several of the characteristics of psychopaths and some of them are undoubtedly true psychopaths. Psychopaths are the 1% of people who have no conscience or empathy and who do not care for anyone other than themselves.

Some psychopaths are violent and end up in jail, others forge careers in corporations. The latter group who forge successful corporate careers is called Corporate Psychopaths. Who psychopaths are and who Corporate Psychopaths are, is discussed further below...

Read the entire paper here.

Evil does exist, and its power ebbs and flows. Or rather, evil exists, but as the absence of something else, the deficiency of goodness and humanity. So it can remain resilient through long droughts because it has no substance of its own to sustain, but awaits only for the weakness or indolent apathy of society to rise again.

One can see this clearly in history, although the skeptic will be quick to point out that all seems dismal, since nothing human is ever perfect.

Still, there are degrees in all things, and the weight of goodness often restrains the impulse of evil, although evil seems to remain ever resilient, never conquered, only sleeping to take a turn another day.   Consider the instances of genocide and widespread impoverishment in the last century alone for example, if you will like to see the corridors in which true darkness dwells and the madness is unleashed upon the world.  And then tell us of the natural goodness of men and their works.

Goodness is not a constant state, or even an end in this world, but a way to an end. It is not an objective to be reached, but a way of life that requires continual attention and remembering.

"...Far be it from any of us to be of those simple ones, who are taken in that snare which is circling around us! Far be it from us to be seduced with the fair promises in which Satan is sure to hide his poison!

Do you think he is so unskillful in his craft, as to ask you openly and plainly to join him in his warfare against the truth? No; he offers you baits to tempt you. He promises you civil liberty; he promises you equality; he promises you trade and wealth; he promises you a remission of taxes; he promises you reform.

This is the way in which he conceals from you the kind of work to which he is putting you; he tempts you to rail against your rulers and superiors; he does so himself, and induces you to imitate him; or he promises you illumination, he offers you knowledge, science, philosophy, enlargement of mind. He scoffs at times gone by; he scoffs at every institution which reveres them.

He prompts you what to say, and then listens to you, and praises you, and encourages you. He bids you mount aloft. He shows you how to become as gods. Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."

J.H.Newman, The Times of Antichrist

Weekend Reading - Ode to Financial and Political Narcissists and Sociopaths

The expense of spirit in a waste of shame (Sonnet 129)
by William Shakespeare

The expense of spirit in a waste of shame
Is lust in action; and till action, lust
Is perjured, murderous, bloody, full of blame,
Savage, extreme, rude, cruel, not to trust;
Enjoyed no sooner but despisèd straight:
Past reason hunted; and no sooner had,
Past reason hated, as a swallowed bait,
On purpose laid to make the taker mad:
Mad in pursuit, and in possession so;
Had, having, and in quest to have, extreme;
A bliss in proof, and proved, a very woe;
Before, a joy proposed; behind, a dream.
     All this the world well knows; yet none knows well
     To shun the heaven that leads men to this hell.

This video below illustrates why the rational expectations model of efficient markets is a dangerously misinformed theory, and perhaps a deadly rationalization for plunder. The theory, like so many flawed economic models, discards the outliers of the norm, who in the real world are in sufficient number to have a statistically significant effect on the outcome and the shape of the market.

And this is why self-regulation without objective oversight, the rule of law, and justice for all in equal measures is a path to self-destruction.

Power attracts certain personality types, and organizations that value power, or ruthless determination to achieve results at any cost, often end up being run by people with the mentality of predators. And the predatory environment can become self-reinforcing and self-sustaining given time.

“A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself.

For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist.

A murderer is less to fear.”

Marcus Tullius Cicero