Darryl or Natalia ,
Steve is quite right. In strictly monetary terms the whole market is a
zero-sum game -- as it is at any one instant of time. If, at the time of
Lehman's collapse, the whole economic world could have been placed in a
state of suspended animation while all the paperwork was followed through
(which would take several years!) then half the financiers would have
become rich and half would have lost their shirts. But it would also be the
case that half the governments of countries would have survived and half
would have collapsed into bankruptcy. It would also be the case that half
the businesses would have collapsed and half of workers' pension funds
would have been empty also.
However, considering all the stress that would have happened to vast
numbers of people (and all the likely destruction of wealth caused by riots
and revolutions) then it would actually have been a negative-sum game. But
why should the world of finance have such a wide negative impact? It's
because the financiers have taken to playing nation-states' governments at
their own game by inventing paper documents of their own -- derivatives and
derivatives-of-derivatives -- which have even less connection with
underlying asset value than governments' own fiat currencies.
At the time of writing this morning my morning paper has arrived. It tells
me the latest silly decision in the European Monetary Union fiasco. In
order to protect itself from the stupid decision of the EMU finance
ministers last Sunday (in effect more money-printing) the German
government, persuaded of the culpability of speculators alone, imposed a
ban at midnight on short selling of credit default swaps (CDSs) as well as
shares in the country's largest financial institutions. The result of this
will be chaos over this side of the pond and will probably accelerate the
collapse of the EMU and then the EU itself.
If this happens then the world will be plunged into a far deeper recession
than occurred after the Lehman collapse. Perhaps this will be a good thing
because it will, at last, fully reveal the fragility and artificiality of
the world's fiat currencies and perhaps restore a currency of real value.
Keith
At 20:39 18/05/2010 -0700, you wrote:
Steve,
Help me out. I'm stuck on your second and third paragraphs below. I don't
see the part where you are clearly explaining how, just because it takes
two to tango in currency markets, the respective economies of the
currencies gambled upon are not adversely effected. Zero sum game aside,
such gambling is world news, and how the billionaires play is mimicked,
not for true reflection of a currency's value, but for the fact that big
investors set trends.
Market confidence is everything, and we only go by faith regarding today's
currency value. Most banking systems are incapable of proving there is
much value in their money, and if they were to be judged by the same
policies by which they judge others, they would have collapsed long ago.
The Feds that should combat inflation have allowed this devaluation for
their own ends.
Also, at your posted site, I grew equally perplexed over this excerpt:
common myth is that speculators, like George Soros, can cause a national
currency crisis. It is important to remember that it is governments who
largely control economic information flows and who are vulnerable to
pressure from the mega-rich. Also, when corrupt regimes siphon off
billions of dollars from their national economies, they weaken the
infrastructure and diminish future productivity. It is the savvy
speculators who perceive aberrations in value, and provide the necessary
information feedback to the world which helps bring about change.
Could this be interpreted to mean that if the speculator is savvy, then
the truth is being revealed or that the change will be good? If Soros
short-sells the Cdn dollar, which he could have the other week, and others
hear about it and do likewise because he's the king, and they win--it
fails to affect our economy in any way? So the loser pays, if he's good
for the credit, which many often are not, but the country whose currency
was bet against has the task of regaining market position in an
environment of good will gone bad because the king decided he had a
feeling, based on gov't reports, that he would call tomorrow's actual
monetary truth, and could use an extra billion.
No doubt Soros is savvy, but are he and others playing the same game right
to interfere in the future of any nation's well being?
You say that in the zero sum game, no net wealth is created. That those
participating in currency spec are using highly liquid assets as deposits,
like gov't treasury bills, bonds, etc. These may be liquid, but they
aren't exactly real. The value of most currencies hasn't been more than
5-20% real since the Seventies. Aside from actual value rules that should
be challenged, the currency speculators often win, and duly manage to
acquire even more unreal money because that's the system. They go on to
reinvest or speculate vast unreal sums for which they are given real
credit and in turn assets. Actual global wealth is a small fraction of a
point compared to the illusory credit these speculators are playing with.
And the more they are allowed to amass, the more devaluation world wide occurs.
>From what I've read, deposits are more typically not so traceable. Up to
one third of HNWI wealth is held off-shore. Taxes on cash assets alone
are staggering. And it is from these unregistered tax exempt companies
that millionaires and billionaires most often play their positions. No
one has addressed the loss in taxes on offshore placements, I noticed.
And we are discussing just currency spec. taxes. No one can readily
estimate the worth of offshore tangibles.
Given a two trillion a day in global currency specs estimate, there seems
to be a lot of fictitious money going around, much untaxed, and very much
affecting all economies. It's created out of nothing, yet because there's
so much of it, all deemed to be assets, it affects real value of the
global standards.
We are definitely adversely affected by the speculative positions of
HNWIs. The funds they play with are unreal, and result in mounting
financial burdens for the less wealthy, whatever way they are invested.
Taxes alone on this market could feed the world, pay for health care
globally, and be properly invested in revitalizing our natural home. (The
purpose of the Tobin Tax is, to some, a start in the right direction, but
its very function is still condoning and legitimizing a system which hurts
everyone--one that should be dismantled.)
With all this money supposedly being made, I can fully appreciate the
position that billionaires could easily right the many wrongs of this
world (many which they have fashioned), if only they cared. Must be
genetic aberration.
Natalia Kuzmyn
Steve Kurtz wrote:
We have on this list someone who knows how to steal money from those who
have very little of it. That is akin to alchemy.
As I've clearly explained, every currency transaction requires a
willing, profit seeking counterparty. If George Soros (or Buffett, or
Gates, or??) makes a billion dollars from a currency position, others
cumulatively lost it. (zero sum)
If it is claimed (sometimes correctly) that a person can muscle a market
in one direction, the person must be accumulating a large position. The
person *must* reverse that position to achieve a profit. So the same
force in one direction would be applied in the opposite direction.
My informal paper on this and other aspects of currency and commodity
markets is here:
<http://www.gold-eagle.com/research/kurtzndx.html>http://www.gold-eagle.com/research/kurtzndx.html
Steve
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Keith Hudson, Saltford, England
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