The Sting - Velocity

In The Sting, the 1973 movie starring Paul Newman, the main action hinges around an elaborate Depression era scam using ‘wire fraud.’

A Depression Era Henry Gondorff

Wire fraud is where telecommunications are interfered with so that the resulting output information - or the timing of it - is different or creates a disconnection to the original information input. This is essentially what HFT (high frequency trading) amounts to, for example, because the interposing of a cost line is not relevant to the actual (real) buying and selling of shares or financial positions. HFT is wire fraud. It makes use of the disadvantage that buyers and sellers are at when the buyer input data is deliberately falsified through spurious buy signals.

One of the most significant, and usually forgotten, elements to wire fraud is the deliberate misuse of time, or timing.

If news you get from reporting in a certain location is deliberately delayed, you are at a disadvantage to those who are doing the deliberate delaying.

Creating a false impression in the gap of uncertainty, allows for guilt by impression - and then default action springing from the consequence of the impression having gathered a certain emotional reality through mistaken belief.

When you look at today’s low interest rates and the absurd size of the static Money Supply, it is possible to gain an impression that something new is happening in economics. Commentators and even a large number of economists worldwide are grasping to ‘see’ some trigger for price collapse or other disturbance because of the seeming impossibility of a continuation of sheer magically created ‘money’ by the Fed without some negative consequence, either on the value of the US Dollar or prices and inflation.

People are forgetting about the ‘Time’ component in the Equation of Exchange. The Fed has tried to change the standard capital term of ten years on bonds by creating focus on something they call the long end, by which they attempt to skew people’s perceptions towards a belief that there is actually something called a thirty year bond and even a connection with property mortgages and so-called longer term money.

Under people’s noses however, there is the catastrophe in circulation velocity - or the number of economic transactions in the domestic flow model - in evidence. By preventing people from ‘seeing’ that a major consequence has already taken effect, ordinary people are at an extreme disadvantage. Everyone believes the Dow can never come down, and that QE infinity can persist without negative consequences. The consequences, however, are already here.

Irving Fisher’s Equation of Exchange has not been repealed, or repudiated by any fact.

People such as Christine Lagarde actually have the audacity to point to low or slow growth as a concern that politicians and bankers must address, whereas in fact it is the money velocity that central bankers themselves have caused to collapse through pushing the envelope on total nominal Money Supply.

The ‘trigger’ is - there is no trigger required! Not many people have worked out that ANY velocity increase, whether economy wide or singular, will pull on the other factors in the Equation (of Exchange) directly.

An umbrella in the BRICS rain - or,
'it's raining BRICS.'

The biggest weapon competing countries - China, Russia, India - have, is not a military weapon. It is the ability or capacity to invoke circulation velocity on the American and general ‘Western’ economy. People have talked hyper-deflation but this is no longer possible at this point now that the gross nominal Money Supply has gone to such extreme numbers whilst circulation velocity was terminally low.

And it is possible to affect velocity from outside of the Fed or Washington politics.

As I demonstrate how in follow-up articles, you will be able to massively profit from the dynamics of simple application of the Equation of Exchange.

Can It Be Averted Now?

Anna Netrebko is a russian opera singer who attracts an amazing amount of negative criticism. The criticism, comes from the usual band of experts who have this idea that opera - or the operatic voice - is about some kind of austerity and machine-like perfection, rather than music. Frankly, I have to tell you that I simply never could ‘get’ what all the fuss was about with a soprano like Sutherland; she was utterly without feeling as far as I am concerned. She was staccato, stilted, dogmatically conservative in her interpretations of roles - and of course absolutely beloved by droves of snobs around the world.

Same as today the self same band of snobs decry Netrebko at every opportunity.

Netrebko with VV

Netrebko, however, is everything Sutherland never ever was. Beautiful to those with music in their soul.

There are perhaps a small handful of musicians and theatrical dramaturges who will wholeheartedly agree with me on this: someone like Netrebko is similar to someone like say, Natalie Peris… Or, simply put, absolutely, totally and awesomely stunningly musical in every possible way.

Natalie Peris is a modern pop trance singer. Well, I suppose not pop exactly.

Peris comes from Croatia, Netrebko from Krasnodar of Kuban River Cossack ethnicity.

Peris - modern Trance music singer

Anna Netrebko just pulled out of a London production of Gounod’s Faust, saying that in the final analysis, she didn’t think the role (of Marguerite) was for her. And a very wise decision, too.

You know, culture - culture - is something that snobs will never comprehend. Snobs want to have a stirred vodka martini but don’t really care that the truly most complicated cocktail in the world is actually the otherwise supposedly crass or commonplace Bloody Mary - which is nonetheless another vodka-based drink.

Aficianado's say this is the most
complicated cocktail

Faust. Sold his soul to Mephistopheles. Mephistopheles is either a being who distributes falsehoods and false stories, or is a ‘non lover of the light;’ someone who hides in the shadows.

The Faust story is a great one, but the opera is unmusical - very orchestral yes, but devoid of melody and aspires to be something on account of extremes of range and instrumental turbulence filled with the crash and clatter of theoretically dramatic sounds. A bit like Dore Gold or Mark Regev, frankly. Look at us, look at us! Woe is us. There will be no peace until Kirk is dead!! (The Klingon High Council).

"Show Me The Meaning..." Lyric line from the below:

Reality Is The Destination

How can you explain to people that the markets are fake?

I’ll tell you a fact that cannot be denied me because I participated in its realisation.

Ten years ago I bought a small stockpile of Egyptian Nile cotton balanced weave fabric. Since then, the NASDAQ commodity quote for cotton showed a relatively big spike in 2011 about four times the usual average price and then a rush back downwards to pretty much the same usual standard bale price.

Rubbish. What kind of rubbish do these guys deal in?

Something real, something real...

The price of real Nile Cotton has gone up twenty times and stayed up and it will keep on going up even from here and it will never come down not for decades. Oh sure you can buy what you suppose is expensive ‘Egyptian cotton’ sheets in premium stores but they are all fakes. You think you are paying top dollar at six hundred dollars a set; you will be paying 3 - 4,000 dollars for the real thing and you generally won’t get it in the US anyway.

See this is the problem we have today - you will just not get this story told anywhere publicly. The Germans are the biggest buyers of Nile cotton and they take the fabric and add more value and then buy it back in their own domestic market. And now we are talking more than a hundred times cost realised in the marketplace.

So what ‘cotton’ are these clowns on Wall Street dealing in? American cotton.

There is a difference between trading for real and trading through commodities exchanges.

Why is the house name of some actual business that physically deals in the goods themselves less of a trading entity or expert than some commodities brokerage in Chicago?

If you look at the main ideas of the genius W. Edwards Deming, every single one of them is a rule broken by the businesses, the banks, the brokerages, and the government of the modern era USA.

If you look at the story of someone like a Jim Thompson, or a Howard Hughes, you will observe the key elements required to make money trading and in production and manufacture particularly: the logic of the output chain is essential and it rests on real demand, or at least the reality of it. It’s not ever about the currency value, or the rate of interest obtaining.

Pure dye silk 

Today a lot of commentators are concerned about the currency value and the potential for a currency collapse or a stock market shock.

But it has already occurred. No ordinary middle class consumer can afford Egyptian Nile cotton even though they are helping sustain the most extraordinary foreign policy in the history of Mankind. Meanwhile, the middle class assumes it is seeing a record high Dow - all utter rubbish. It’s the same thing as going down to some supposed up-scale gallery and purchasing Egyptian cotton sheets ‘made in China.’ It’s simply a fraud.

Lime acid phosphate is a soda fountain drink made from actual lime syrup and acid phosphate and it tastes different to what you get now in a bottle.

The Merry Widow ice cream is a sundae created around 1908 after the huge success of Franz Lehar’s opera of that name. The real one has ingredients in it that in spite of assumptions about the internet, are still held secret among real chefs and you will not find them exposed anywhere on the internet even till now.

And those who know about the real thing will only laugh and shake their heads whenever ‘experts’ rattle on about what they presume to know.

A real Merry Widow ice cream from Conrad's

It’s so attractive to hope that investing, or leveraged investing through exchanges, or shorting when the time comes, will deliver a profit to the ordinary individual trader. The market regulators and the main branded bankster players have stymied themselves by using pretend money they have credited themselves with. ‘Dark pools’ simply mean that there is an artificially high price for put options because of the pretend money being allowed to be used by the main players. Dark pools mean that the Dow is at unprecedented highs for the consumption of the domestic voter.

I’m afraid I’m with Sinclair on this. A real exchange is betting that gold is $50,000 an ounce.

It will definitely not happen quickly. But it will happen. And it will happen in our lifetimes. Before it does though, you will start to see gold physically trickle out of the country. And when it turns into a flood that’s the end.

Why Is Gold Important?

This notion about ‘fully informed market...’ What do you guys and gals think about it?

For me the financial world has become far too complex a place to allow such a thing to be a realistic objective in the first place. Who knows what was talked about before BNP copped to a 9 billion US dollar fine for using the SWIFT system to move money to and from places that the US government decided had been embargoed on behalf of the whole of the rest of the world - thanks for that, by the way; without the moral perspicacity of Obama and/or Boehner we would never know good from bad in this world. As a Greek from an ancient part of the civilized world I really appreciate being lectured about morality, of all things, by all of the Johnny-come-latelies who seem to think they invented it. They certainly invented a special (peculiar) view of it.

WGC-sponsored big gold for weddings
show in India

But apart from the sheer hubris of the US financial astral plane, the single most troubling issue is the fact that no sooner has some new Soros worked out some brilliant angle, than every man and his dog is spruiking it all over the internet as if they ALL ‘saw’ it first and before you know it, the whole advantage is gone through too much loose talk and nonsensical strategizing.

Information is no longer making the market run.

Information no longer gives you an advantage in price acquisition.

Take gold, for instance.

If you want to know about the gold price - if you really want to know about it - you need to know about trading; I mean about general trading, not gold trading.

You know the World Gold Council? Well but have you heard of the London Tea Council?

My father’s aunt was one of the founding members. She had estates in Kenya and Malaya and India. That was a long time ago.
I’m not sure if this current ‘Tea Council’ is some new iteration or if it is the same one as in the days of the clipper ships.

Anyhow. Tea - they say - calms you; coffee, of course, creates revolutions.

Floral teas from Twinings

I would recommend that those who are resident in the USA stay with tea and steer well clear of coffee. For one thing tea is usually cheap and coffee can be very expensive, for the good stuff…

‘High tea’ is nevertheless a great joy if it is done well. The London Tea Council awards the best ‘high tea’ in London with an accreditation every year.

You can’t generally trade tea for coffee in the source locations. But you can trade them using the intermediation of gold. As I explain to those who think that having an account on IronFX of some one of the millions of computer screen trading exchanges dealing in currencies and interest rates - you need a minimum of THREE currencies in order to make actual money from price disequilibrium. And in a world in which everything is harmonised through too much ‘official’ data and a ubiquitous information pool, you need a not-well-known product or a specialised service with real demand over time via which it may be possible to use gold in its best function in order to profit.

My own personal view of what is dawning on the world is that the US market will undergo severe strains, but that most of the rest of the trading world will not.

It’s been a very great mistake for investors to continue to assume that the dominance of Wall Street and the financialization of everything has any effect whatsoever on real trade of real merchandise…

This is of course, not an idea that has a lot of followers.

Most banks today operate under a fallacy that it is easy to access real merchandise through financialization, but they are indulged by central banks and they thereby get away with pretending too many things are so that really aren’t.

Baltic Dry rates still show the real paid demand for real goods in bulk. And these are all down.

‘In bulk,’ though, gives the game away. I could not have transported in yesteryear, any of the high premium products in bulk, that I can still not any differently transport in bulk today either; the real supply simply does not exist.

Nah, see they drink coffee in the Baltic

The mass market is not an educated one even though all the brand marketers like to pretend the masstige market is an educated one.

The clue to the gold price and the moments when it moves is in finding that educated market. In historical phases of decadence - which means exhaustion from growth, which perfectly describes where we are all at - industrial, conveyor belt assembly line production loses its efficiency because the end market is not there at the margin of profit needed. People find it hard to accept this truth.

Keep your eye on the big name advertising consultancies. They are going to veer off away from the ‘luxury branding market’ and the broad access market although this has been a widespread thing for them over the last ten or twenty years. Once you start to see them go for such a small client base that you start to wonder what could possibly justify the advertising you will know that the time to buy the gold price is clearly at hand.

Trust me about this. I speak to these people. I know what they are talking about between themselves in the back rooms. It’s probably a bit arrogant of me to say I know what they are thinking. But of course I know what they are thinking. They are advertisers, they can’t help themselves. They advertise all the time; it’s a habit. I have played poker with some of them. I don’t know anything about poker myself. The only book I’ve ever read on the subject was the one by Alan Patrick Dowling. The guy who started the CIA. He spent a lot of time in Shanghai with white Russian women and Paris Chinese wearing real Barguzinskya sables and unweighted (pure dye) silk. And playing poker.

Butler service for the up-scale people. Always.

Nothing changes. Apparently no American has ever smoked a real cuban cigar. And BNP Paribas never will.

How about adding up the voluntary ‘fines’ paid by businesses and banks to the US over the last ten years?

Information is not about what you know; it’s about what you don’t want to know but find that you have to all the same.

Time for a cup of tea.

Misallocation Of Resources

Misallocation of resources is a subject that gets some, though not too much, attention in most comprehensive courses on economics.

Where there is competition for something - time, energy, sex, food, shelter - and there is scarcity of those things, then the economic allocation of resources is a key concept intelligent human beings apply to get the best use of everything that is available. Having one significant thing can mean ending up with an adequate supply of the others.

Brunei Qintar box

Alan Greenspan’s infamous ‘moral hazard’ statement when he was explaining to Congress about the consequences of bailing out certain favoured banks, quite deliberately generalizes the idea that there is this, by his form of words, esoteric, philosophical risk involved. He could have said that when someone can eat as many lollies as he wishes, that person could get morbidly fat and sick. That is, If he were to remain alive in the first place. There was this other, attendant phrase tossed about at the time - do you recall the one: ‘an economy on drip-feed.’

When you succeed in actually flatlining an economy, though, but you insist that the thing is still alive, there is also such a thing as necroconomics. Well there is now anyway.

A dead economy needs nothing. It doesn’t matter if there is scarcity of something that might have been important when the economy was alive. It’s dead now and needs nothing to continue to exist as an artefact. And that is the real reason there is so much derivative trade around - the economy intrinsically does not ever require actual delivery of anything now.

And so we have succeeded in separating - or liberating, in some people’s minds - economics and finance entirely from the real world of humans.

Why ever even pay lip service to a rising stock market? Or strong bond prices as an indicator of low risk?

The misallocation of resources sees things like what just happened with Treasury Wine Estates - a global wine seller focussed on Australian masstige wines. They are going to write down $260 million in value, and you know what, they have also drained (stuck down the drain) vast quantities of wine because they really can’t sell it at the price they want! So they are just going to ‘disappear it’ all wantonly away.

Not a Treasury Wine Estates box...

Personally I find it hard to buy just one case of Penfolds Grange, but these geniuses have not only bought lakes of it but they are going to throw it all away and write off the money they spent.

Money free = crazy people gone bananas even worse still.

But then you do have to ask - especially in respect to the Fed's behaviour - what if it wasn’t accidental misallocation at all but quite deliberate misallocation designed by someone not interested in keeping the USA intact as a unique power; and certainly as a unique monetary power at that?

You do have to ask that… I mean it would be breathtaking if it were a designed scheme.

It is breathtaking enough that misallocation due to mindlessly supporting the consistently same handful of lying thieving scheming parasitic banks, is actually occurring without anyone trying to stop it.

And there is also a consistent tactic exposed by people exercising power - the creation of artificial scarcity through wanton destruction. Why isn’t there dramatic increases in employment? Substantial increases in private consumption? On the one hand you have the standard lunatic politician and his media master talking about the need for austerity and not spending more than you have, and then turning around and, being a monopoly holder of seigneuriage, issuing the greatest amount of debt money ever in the history of the whole of Mankind.

No. There is definitely madness and method.

But you see, here is where the whole thing falls apart right under everyone’s nose but the crooks won’t see it because they are themselves fatally mesmerized by the very glitzy power they have over stuff they can readily industrialize: you can only create artificial scarcity but you cannot ever ‘create’ genuine scarcity…

Yes, you can substitute and flagrantly lie about what you are proferring. But you can’t say a thing works when it doesn’t and then yourself expect it to behave according to your own lie.

And yes you can indeed mind control large swathes of the public a lot of the time too. But you can’t alter the absolute utility value of things that have genuine functional utility. Oh yes, some people will die not putting the food to their mouths. You can’t lead a horse, and anyway, not your problem.

Today’s world is about the accurate thinker discerning the difference - and accepting that he might have to make adjustments to his erstwhile cherished beliefs - when he sees authentic facts side-by-side with nonsense put up by the establishment which seeks to fudge the value of demand in the face of a real scarcity. Not everyone is going to get to this point of objective self-reflection about ideas.

It would be nice to think that come some morning very soon, all the favoured banks and all of their fictional assets will disappear, that is, become worthless and more particularly, the sway they hold over the politician will come to an end too. The latter won’t happen. At least not easily. The former has already happened. In terms of purchasing power over genuinely scarce things with real utility, it has already happened. It is a delusion practised on the uncritical, that this is not so. But people have been made to believe that the globalized industrial complex - ‘the Borg’ - is able to manufacture and produce anything at will and with lubricious ease as if it were all just any simple commodity. And this is hugely erroneous.

There is a lot of mythology spouted in the market, and people such as Bain & Co, for instance,  are very good at employing it. I mean, seriously good at it. But it is still mythology and you can’t reliably invest based on media and market myths. The world is still a competitive place. Poroshenko is finding this out in spite of his being a person of goodwill who cannot begin to fathom the duplicity of his advisors.  He is going to find out there is a problem with money alone as the guarantee of access to utility.

Orit Gadiesh from Bain would not be allowed in here

People in financial institutions buy and sell money as a way of avoiding spending money. Spending money is what people do when they see utility today and have to spend to get it. People know perfectly well on some occasions that prices are falling or that the currency is gaining exchange value, for instance, let’s say - so why don’t they just wait until whatever thing they want is cheaper before they spend money to buy it? Because of the utility it represents to them today.

Present era bankers make the too obvious presumption that ‘people want money,’ and that therefore if they give themselves a lot of it, and deprive the wider market of it generally, they will induce scarcity of money and thereby ensure their power over the whole of society at large as people scramble for scarce money. But people just want utility. Money isn’t scarce at all. Particular forms of it are scarce.