A brief treatise in which Jesse questions the reason for this blog among other things
Most people will read only the subject title of this essay and then immediately begin composing their own off-the-cuff thoughts which they will rush to either email to us or slap on some chatboard or blog somewhere. Or they might even scan it for a daytrade and then discard it. But one or two will read it and think about it, and become links in a chain, and the spirit of knowledge will grow, little by little.
The government is intervening in the various markets. There is little or no question about it, if you allow that actively changing, with intent, the rules, money supply, short term liquidity, interest rates, methods by which key statistics are tallied, spin and other information that might impolitely be called 'propaganda' is manipulating the markets. And it often is.
They admit it. The evidence is there. If you don't know about it you have not been keeping up with current events. So it becomes a question of when, where, and why.
On the other hand, there are those who think every market move is active government intervention. This just is not the case. In the short term markets are more like rugby scrums than chess or even a well-managed game of limit poker, and the bigger players spend a great deal of time putting up bluffs and bullying the smaller player using their better access to information and bigger stacks of chips, especially when government regulation is lax and inefficient, with society ruled by narcissism and greed, as it is today.
The action of the past two days in the US stock markets is a almost classic end-of-month paint job by the fund managers and other-people's-money crowd, who are able to influence the grade on their own reports cards by buying the market and driving certain prices up after selling their losers three days before the end of the month. Their motive is their bonus, and the lax regulation with light penalties, and their general lack of compunction against cheating which they have likely done in school, in sports, in relationships, in most of their lives.
It is very hard to look at a specific market at a specific time and say with certainty "Aha, this is explicit government intervention" as opposed to something else. Governments work through third parties and hide their tracks, except when it suits them to be blatant. Often big third parties are just flush with hot money from the Feds and looking to shove some market for the short term trade.
But they do it, both directly and indirectly. If you are a momentum player it doesn't really matter, and if you are an investor you will see it only in sustained efforts that last some time, and usually involve a multi-faceted approach. We call these 'reflations' and try to point them out as we think they are occurring.
Speculating about when, specific markets on specific days, and the why, their long term motivations, is fun because its like gossip. It also can have some value if it causes us to look at things more deeply and examine the evidence, which may be easily dismissed by the public. Spotting effort to suppress or inflate markets can be exceptionally rewarding, since they often fail and sometimes spectacularly so. And motive is a key companion to opportunity, means, and any other circumstantial evidence.
But more often in questioning long term motivations we are asking a question that cannot be answered objectively except after a very very long time, even if then. Its like arguing about whether or not God exists, or aliens are visiting us, or what is the best beer, or who all shot Kennedy, or which is the greatest football team. Sometimes these discussions are fruitful and scandals are uncovered. They do exist. But often they degenerate into recreational discussion and faux expertise.
What makes it fun is that you can just yell about it endlessly, and believe what you want, because what cannot be proved cannot be disproved.
It is a way to pass the time relatively effortlessly, like griping and bitching at work. It can be a trap because anytime you are wrong you can retreat into the rationale of external forces. How can you be responsible for your actions if 'they' are doing it to you. Sometimes it can be a crutch. But so many things are.
As a general rule an objective person doesn't take credit for being right unless they know why they were right and can explain it. Otherwise they might just have been lucky, and it not only does not add to our knowledge but may reduce it.
If the Fed is indeed making policy errors, then we will take one path versus another. Then one should do one thing versus another. Those things can be examined, can be dissected, can be studied, but they take work and effort, and one can be right or wrong. But they add to a body of knowledge. And often this work is dismissed by those doing the behind the scenes work as recreational gossip. They seek to raise the bar so high that no possible proof can be provided without subpoenas and wiretaps.
Speculation based on evidence is the heart on the scientific method. Yesterday's radical theory scoffed at and discouraged by the established view is tomorrow's generally accepted truth. The difference is free discussion and evidence, above all, strong comprehensible evidence.
The value we get from even pointless disagreements is that it causes us to think and define thoughts which otherwise are all too easily just parked in our minds, and never really given any vigor or life.
Besides the relentless impulse of humanism, this is a major reason for this blog. We used to look for valuable feedback and discussion on the specifics, but that's beyond hope.
Those who are in-the-know are in denial and hiding, trying to line their pockets and curry favor with whomever they think will be in power next.
Those who don't know are running around waving their hands, shouting slogans and hearing only their own voices, or just ignoring it all getting loaded on whatever happens to be handy.
All in all, a nice microcosm. Life imitates high school so often in our experience, and one's best recourse is essere umano, to be human throughout it, and perhaps give the bastards a swift kick just to let them know you're still out there.
In the meanwhile there are important and interesting questions to investigate as best one can. Its not clear yet exactly which way this thing goes, and the variables interact with one another, and are many more than can listed here:
A. Will our government become a better democratic Republic, Fascist, or Socialist, and the related broader question of the Individual vs. the State which tends to modify all the general types.
B. When and how the dollar will be further devalued and how fiat currencies can be sustained without being destroyed by inflation? (By the way in all history none have succeeded}.
C. How will the world's reserve currency evolve? Can a greater centralization of power and control be avoided gracefully? Can freedoms be maintained if it cannot?
D. How deep and protracted will the recession be and will it cross a threshold into a depression through Fed policy errors and how and when will we know it?
E. Will there be a 'moment of clarity' when the failure becomes evident and things move with alarming speed, or will this be a damp fizzling decline into an ignoble whimper.
We will continue to explore all these areas with what we hope is a bias to objective analysis and pertinent data, laced heavily with humour, satire, charts, and pictures.
Little by little, there is progress, and the body of knowledge grows, and life is renewed, and creation is made more orderly, and liberty and the spirit is restored.
