The Illusions of Paranoid People
There are so many crazy, paranoid, cynical people commenting on the financial system these days. Its both amusing and enervating to the average good hearted believer.
They bring up all kinds of obtuse little discrepancies and claim these must be the product of some wild conspiracy or other. Of course we all know better than to believe such unstable, maladjusted people.
But too often they hit a nerve or two.
Some cynical people ask “Why would oil be so cheap when the world uses so much of it, and there is so little left?”
These same cynical types would ask “Why would commodities be so cheap when so much of our natural resource has been depleted for so long?”
And then they ask “why are so many products, some of them wildly complex, like cell phones, still so relatively cheap?”
“Because” these faithless people say, “its all being subsidized”.
Subsidized? But how could that be you ask?
Well just as an example we might concieve of the following little scenario for the benefit of the “paranoid” and “distrustful” among us:
(only to demonstrate how “paranoid” and “distrustful” minds actually think)
Anything can be oversupplied, if its overproduced. If the banking industry, for example, were to come to the conclusion that they could make a substantial amount of money elsewhere, then it is possible for that most important of industries to direct credit to any particular industrial sector and prompt that sector to overproduce whatever it is supposed to produce. Once that industry overproduces a particular product or resource, the price of that product or resource drops.
Of course honest people wouldnt do that…but just for purposes of demonstration we’ll continue-
For example if the banking industry felt that directing large outflows of credit to the oil industry would help the retail industry-just as an example-it would be very possible for the banking industry, having infinite amounts of credit available from the Federal Reserve, to direct a substantial line of credit to anyone willing to drill a hole in the ground for the purpose of finding oil. For example.
If, again- only just as an example- the fracking industry were to prove that it could produce oil, even if not all that efficiently, or all that cleanly, and could thereby reduce oil prices all over the world by oversupplying the world with oil, the banking industry could, if it were of one mind, for example, be able to direct gigantic amounts of credit to this particular industry. The outcome would be that an oversupply of oil would keep prices for oil quite low.
If then the banking industry, for example, could then invest in the retail industry directly(which we “absolutely” know it cant), then it would reap all rewards from the retail industry, and in effect would be subsidizing the price of oil, or of commodities in general.
Though there might be great potential profits in the oil industry for traders on a real free market exchange, that potential profit for those traders would of course, and only just as an example, be lost.
Therefore those free market oil traders, for example, would not be taking home the large amounts of speculative reward that a more balanced financing of the oil industry could produce. For example if oil should rightly trade at 100 dollars or more a barrel today, due to long term limitations on supply, by having oil trade at thirty dollars a barrel, those free market oil traders would take gigantic losses on all futures bets. They would not have a great christmas for example. That loss of their christmas money would then, for example, wind up subsidizing the lower cost of oil for the rest of us. Their loss, would be our gain-in this example.
Their loss would be our gain, even if these “free market traders” should not in the real world be suffering a loss since there is a true long term scarecity of the product..but due to a temporary credit induced oversupply, they lose.
The capitalist version of “redistribution of wealth”, in this make believe example of paranoiac thought.
And if the banking industry could, in this example, trade on the free market itself, that is buy and sell stocks, and futures(which we know it cant), then it could easily invest in those beneficiary businesses that would reap the rewards of low oil prices, as for example the automobile industry or the retail industry, or the restaurant business, or the hospitality business etc etc. Therefore the banking industry, in this example, would not really lose anything at all if it could simply switch its bets and direct its interest in the right direction, for example.
So if the banking, and financial industries were, for example, to have the ability to collude, and direct their financing towards certain target industries, while at the same time having free reign to invest in any other particular beneficiary sector, they could make large amounts of money-for example.
And if the commodities industries eventually failed due to the overburden of debt and poor overall returns, the banking industry, in this example could, for example, be able to put those commodity producers up for auction, and buy those businesses out anyway. In due time, the tides of profit sentiment and intent would shift, and those commodity supplier businesses bought out for nothing, after being ruined would soon be worth much more than they were purchased for at auction. Any temporary losses in loans would be written off as tax deductions and expenses-therefore tossed onto the public-and any gains made from the now ressurgent commodity industries could then be harvested wholesale.
The ring is given with the left hand, and magically reappears in the other and into the right pocket it slips, an impressive sleight of hand.
Any bets made on they by now depressed commodity futures would then prove to be quite lucrative in this make believe and fantastic example that we’re offering as a diversion for your amusement only.
Thus, it would only be a matter of redirecting profitability towards the interest taken…for example.
Of course this is just a fantastic absolutely rediculous excercise in hyperbolic mathesis, and we all know these things dont actually happen.
The government would never let something like this happen because political representatives are not in any way bound to do what the financial industry wants them to do; and yes, the financial industry really is a “free market” and there is no collusion whatever to be found in it. And Thank Goodness for that! Otherwise there is absolutely no telling what kind of tremendous damage this kind of corruption could ultimately cause to the underlying natural economy. Thank Goodness again that our elected politicians are free to do the right thing. Thank Goodness we really do have “Free Markets”..and a real democratic rule by the people and for the people!
Its clear today that money really does flow in a “free market” system according to the requirements of a totally independent and free thinking public, and that’s what explains the dow being at 18,000, instead of being at, for example 8,000.
Money moves on its own, and no, it is not directed, as in our example, by the shady profiteering motives of a few people who have control of most of it.
And the Financial Media is not in any way controlled by Wall Street, and no it is absolutely not intimate with Wall Street.
And the x’s and o’s and p’s and q’s are not really masking an underlying reality of collusion and corruption where money goes where those who control it want it to go,when they want it to go there. Thank goodness for that.
And yes the FX VIX and DX really are what is important when wathching the financial show. No matter what you think, or what all these terribly paranoid, cynical, crazy, angry people think either.
Believe me -and take it as an act of faith-when I tell you that the x’s, y’s and z’s really are what you should be paying attention to when looking at the financial papers, and no, there are no illusionists behind those “magic tricks” so many unstable people seem to think they see. Believe me, there are no performin artists moving money wherever they want to move it to…if you have ever thought this thought, Believe me when I tell you its all in your head. Its an illusion.