Rolling Stone's Matt Taibbi has once again put the world's major hard news
organizations to shame by describing, in comprehensible terms, the pervasive
corruption at the heart of the financial system. Below are his concluding
paragraphs from a much larger article that everyone with money at risk in
a bank, brokerage account or business should read in its entirety.
Everything
Is Rigged: The Biggest Price-Fixing Scandal Ever
After scandals involving libor and, perhaps, ISDAfix, the question that
should have everyone freaked out is this: What other markets out there
carry the same potential for manipulation? The answer to that question
is far from reassuring, because the potential is almost everywhere. From
gold to gas to swaps to interest rates, prices all over the world are dependent
upon little private cabals of cigar-chomping insiders we're forced to trust.
"In all the over-the-counter markets, you don't really have pricing except
by a bunch of guys getting together," Masters notes glumly.
That includes the markets for gold (where prices are set by five banks
in a Libor-ish teleconferencing process that, ironically, was created in
part by N M Rothschild & Sons) and silver (whose price is set by just
three banks), as well as benchmark rates in numerous other commodities
- jet fuel, diesel, electric power, coal, you name it. The problem in each
of these markets is the same: We all have to rely upon the honesty of companies
like Barclays (already caught and fined $453 million for rigging Libor)
or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond
auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging
and Libor manipulation) to faithfully report the real prices of things
like interest rates, swaps, currencies and commodities.
All of these benchmarks based on voluntary reporting are now being looked
at by regulators around the world, and God knows what they'll find. The
European Federation of Financial Services Users wrote in an official EU
survey last summer that all of these systems are ripe targets for manipulation. "In
general," it wrote, "those markets which are based on non-attested, voluntary
submission of data from agents whose benefits depend on such benchmarks
are especially vulnerable of market abuse and distortion."
Translation: When prices are set by companies that can profit by manipulating
them, we're fucked.
"You name it," says Frenk. "Any of these benchmarks is a possibility for
corruption."
The only reason this problem has not received the attention it deserves
is because the scale of it is so enormous that ordinary people simply cannot
see it. It's not just stealing by reaching a hand into your pocket and
taking out money, but stealing in which banks can hit a few keystrokes
and magically make whatever's in your pocket worth less. This is corruption
at the molecular level of the economy, Space Age stealing - and it's only
just coming into view.
Some thoughts
Knowing what we now know about the big banks, the idea that precious metals are
not manipulated is absurd -- which explains, if an explanation is needed
-- why the paper and physical markets are diverging. Paper gold is at the
mercy of the manipulators, while physical gold is immune to them - and
is in fact a threat to them. An ETF like GLD is emphatically not the same
thing as a gold eagle in hand.
With the political and judicial systems now wholly-owned subsidiaries of the
big banks, buying physical gold and silver might be an individual's last effective
weapon against an emerging meta-government run by and for the people profiled
in Taibbi's article.
In a broader sense this tracks with the concept, popularized by Automatic
Earth's Nicole Foss among others, of a shrinking
trust horizon. As we discover that the people running the big systems
from distant financial and political centers are "harvesting" us in ever-more-creative
and hard-to-detect ways, the number of people and organizations we're willing
to trust shrinks and recedes towards our homes. We can't trust dollars or
euros or yen so we convert them to precious metals held outside the financial
system. We can't trust the big banks so we open accounts with local credit
unions. We can't trust Big Food to tell the truth about what they're feeding
us so we turn to local farmers markets and backyard gardens. In some ways
this is good and right and as it should always have been. But as it progresses
it becomes a threat to the systems we're abandoning, raising the question
of how they'll respond, with what new lies and what kinds of coercion.
