In the comments below the latest article on this subject, Jus7tme asked a good question:
ZeroHedge/TylerDurden, Can you distill the significance of all this a little more? What exactly is it that GS gets to do that the rest of us don't, and how are they using it to screw us? I'm going to re-read the old article now, but I'm having trouble reading all the between-the-lines stuff.
This question made me start to think about answers. The answers are not as obvious as they might seem. So first, let us deconstruct the market process.
Imagine a live auction.
It really doesn't matter what is being sold. What is important is the transparency of the process. First of all, you can clearly view the product being sold. In the video above, the product is the house in the background. Secondly, you can observe the bids and you can see who you are bidding against. You can also see how many people want to buy the product, which gives you a gauge of how far and fast the price might rise. In this primitive market process, basically everything is transparent.
Now, imagine that you can no longer see the product. Instead, if you want to participate in this auction (which is completely voluntary), you must rely on the description of the product that is put out by the auctioneer.
Now, imagine that you can no longer see the other bidders. They are hidden in something like a voting booth. You really have no idea who is bidding or how many people are interested in the product.
Now, imagine that you can no longer see the auctioneer either. In fact, imagine that the auctioneer is part of a company, which puts out the product being sold, and that this same company also hides people in some of the "voting booth" tents.
At this point, let us take our imaginary auction to the computer screen, since pretty much all of our real-world senses are gone. So now, imagine something along the lines of a quick Ebay auction. Only we know that the person running the auction is the person selling the product, and we trust his description of the product (at least we must if we have voluntarily agreed to participate), but we also know that he is bidding against us among the other bidders.
Now lets throw in a twist. Let's say that the price in this bidding process now has the ability to fall as well as rise. In the above video, once the bids started coming, the price could only move in one direction, up. Once it stopped moving up, the auction was over. But in our new iteration let's assume a new method for the price to fall. Let's say that this auctioneer created a second product, which is essentially the antithesis of the first. And as people bid on this second product, its price goes up but the price of the first product goes down.
Now lets say that there is a large, but finite quantity of these two products. So we are no longer bidding on one house, but we are bidding to buy one of many identical houses. But since they are so big, let's just say we are bidding on one sheet of paper that says we own something. That will keep it simple.
Now it is getting quite complex, so let's get rid of the paper. After all, paper just kills trees. So now we will be bidding on what used to be this paper saying we are the owner of something, but instead of killing trees, this auctioneer is just going to put a little digital computer mark by our "auction number" on the screen. If we win the auction, we get the mark.
But you know, this has really morphed from the video above. In the video, if we won the auction, we had a nice house to go play in. Now we just have a mark. So let's imagine that the whole motivation of the game has changed. Now, as soon as we win our auction, we can resubmit our little mark to be sold to someone else. And if they pay more than us, then we make some money. But don't forget, we are also playing this game against the guy who is creating and selling the product, because some of those other "auction numbers" on the screen represent him buying his own product... from himself! And why would he do that? Well, he would do that to make the price go in one direction or another.
Oh, and he also has that opposite product. Let's call it a "short ETF". This "short ETF" is essentially a way to put downward pressure on the bidding process which was an impossible task in the house auction above.
Now here is where it starts getting a little crazy. You know I said that these "products" are in a "limited quantity". Well, let's now imagine that the auctioneer, or any one of the other secret players, can sell either one of these products even if they didn't buy it first. In other words, "supply" can be added to the market process with the click of a mouse. And this "supply" can be either the main product, created by the auctioneer, or it can be the inverse product, also created by the auctioneer.
Well, up until now, we were relying on supply and demand fundamentals combined with price movements we watched and analyzed in order to squeeze a little bit of profit out of this game. But it is getting very difficult to do now.
So now let's say that we just say "sorry, we no longer want to play this game." Remember, it is a voluntary process.
But wait. Not so fast. Imagine now that your retirement pension fund has been "playing" this game. And not only that, but someone else is managing it. So you take a close look and you realize that your pension fund has fallen in value about 40%. What the heck? "This auction process is so rigged", you say to yourself. But then on a closer look, you realize that at least it has been going up a little over the past two months. What do you do?
Now, imagine that you find out that the game has actually been changed for the last few months. Now, the auctioneer himself is buying and selling more of his own product than everyone else combined. This gives him total control of the price. So you think, "well, he must want my pension fund to go up in value". But how can this be? He is obviously in this game to make a profit for himself. And as you know, this is a zero-sum game. So something must be going on.
Perhaps this crazy auctioneer stole so much money from all the players that he now has to give some back or else his game will come to an end. Or, perhaps he has some special deal going with those players that are managing your pension fund. At this point, it is really hard to tell what is going on, but it can't be very good for your pension money in the long run. You know this auctioneer is not Santa Claus. Or is he?
What if... this auctioneer can not only create more of these products, but he can ALSO create more MONEY? What if he is pumping some of this new money into your pension fund to keep you from withdrawing your wealth?
Boy, this gets complicated. What do you do? I suppose you could just sit back and take the free money. But how big is this game? You have no idea. And if he is creating money just like he creates product, doesn't that very "money" become as suspect as the product? Eventually it must. And if he is NOT creating this money, then something else sinister must be going on. Either way, I think you have a problem.
At this point you start to wonder, "what has become of our market system? And what is becoming of "money" itself?" At this point you start to long for the markets of old. Where real goods were exchanged for real money, and an entrepreneurial spirit like yourself could make a real profit with a little hard work and a little knowledge.
I think what has happened is that our market system and our monetary system have grown so complex over the last hundred years that only the very operators of the system can now profit from the system. And on the rare occasion when it appears that someone OTHER than the operators are profiting, what is actually happening is only "appeasement" in order to keep the system going. The very operators are giving a little bit back, knowing full well that whenever they decide the other participants have been calmed, they can reverse operations and start taking again.
When the Fed prints money and gives it to the US government, the government spends it and real, physical capital, real physical things and human effort are diverted from "we the people" to "they the government". This happens in the here and now. It is happening right now!
And when the Fed prints money and gives it to our "auctioneer", real market-driving power is diverted from "we the people" to "they the operators of the system". Perhaps some of that is given back to us to keep us sedate. But is that enough? I think not.
Here is the problem. More and more people and nations are aware of what is going on. It is not always talked about openly, because that is not the best way to prepare yourself to abandon "this system". The best way to profit from the GLOBAL ABANDONMENT OF THIS SYSTEM is to prepare in secret. To get your affairs in order while "they" think they have sedated the masses.
This system can only continue for as long as a simple majority of people believe in it. And here is a list of the "groups" that are preparing for ABANDONMENT. China, Russia, South America, Middle East, Southeast Asia, perhaps 30% of Europe, and perhaps 1% of the rest. So let's check the numbers.
Total World Population 6,707,000,000
Latin America 577,000,000
Northern America 337,000,000
To be fair, let's put in the US$ camp, Northern America, Europe, Oceania and half of Africa. That works out to 1,589,500,000 people.
The rest of the planet, Asia, Latin America and half of Africa works out to 5,117,500,000 people.
So by my calculations, that is roughly 25% of the world in the dollar camp. And 75% of the world preparing to ABANDON the dollar.
I am sure you are aware that the 25% in the dollar camp holds most of the world's "dollar denominated paper wealth". However, that other 75% actually holds more REAL wealth in the form of commodities, minerals, land, oil and gold, both in and out of the ground, which is suppressed in (relative) value by the dollar system.
So if the ABANDONMENT of this system happens, what do you think will happen to the balance of wealth in the world? What will be the outcome? And how can you prepare for this? I think the answer is clear.
Avoid the rigged auction and all the fraudulent paper. Soon it is going to burn in a massive fire. Very soon.