Uber financial investigative journalist Matt Taibbi has discovered what we too realized when we began to scrutinize the financial industry. In his latest article, he writes, "Everything Is Rigged: The Biggest Price-Fixing Scandal Ever."
The article's cut line is, "The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There's no price the big banks can't fix."
Taibbi's incredulity is evident throughout the article, as well it should be. The interest-rate swap market is part of the larger derivatives market that totals over one billion TRILLION dollars.
Taibbi can hardly believe what he's learned because he recently did an expose of the so-called LIBOR scandal, in which it was revealed that a handful of bankers and traders were manipulating the inter-bank interest rate.
At the time we pointed out that when you allow a group of young men to take affirmative responsibility for hundreds of billions of dollars of bank lending every day, some sort of collusion is inevitable.
We also didn't think much of the scandal itself, pointing out that those who control these large banks seem intent on creating a neo-Pecora commission. This US commission in the 1930s held hearings in Washington, DC and ultimately created the SEC (along with its variants globally) and the rest of the regulatory apparatus that remains with us in the 21st century.
Given the endless financial scandals that keep sweeping across the industry, it is fairly obvious that this regulatory system needs a good deal of improvement. In fact, I think that it may be no coincidence that so much is being revealed now. The idea is surely to create the conditions for another international regulatory effort that will end up further controlling what is left of free-market capital raising.
It is a global game for globalists. The game is to regulate everything and then to position oneself above the regulations and above the governments that wield them. This gives you tremendous power over everyone else. One of the tools being used to whip up sentiment for a larger regulatory revisiting is scandal and more scandal. There have been revelations of so-called crooked practices in a number of areas lately, mostly in the area of industry pricing. It turns out that many standard prices are set via indications of interest rather than outright competition.
We can see the same system at work in the gold market, where a small group of wise men set the price for physical gold every day. And now, as Taibbi and others have revealed, the dysfunctional system also affects interest rate swaps. This has incensed Taibbi, who opens his article as follows:
Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything.
You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."
That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.
What Taibbi has discovered is that the financial industry is being deliberately controlled and manipulated by small groups of people. It is good that a leading financial journalist has discovered this but now we await Taibbi's next step.
What he must inevitably begin to explain if he is sincere is why this system – inviting corruption as it does – is basically the same one followed by central banking.
Central bankers fix the price and volume of money just the way handfuls of individuals declare price of interest rate swaps or inter-bank trading rates.
The same possibilities for manipulation exist, as well. Does anyone really think that corruption stops at the edge of the LIBOR market? No, the system itself is dysfunctional.
The system is dysfunctional because it has been deliberately drained of competition. In fact, bigness and non-competitive financial forces have been encouraged. The idea has been to make banks into electrical utilities carefully regulated and closely scrutinized.
But the trouble is that when it comes to utilities, the substance of power generation cannot be generated at will. The substance that central banks utilize is money – which they can create virtually at will. This ability distorts the entire process. Central banks are not utilities and never will be.
The other issue that even the best mainstream journalists like Taibbi never discuss is that central banks themselves have evidently and obviously been created for certain purposes. They are globalizing instruments and the booms and busts they inspire create further centralization.
When one looks at the world today, the amount of centralization and globalism is staggering. We are to believe that it is merely an inevitable outcome of modernity but this is simply untrue. Globalism is being imposed and is not merely an innocent evolution of the past centuries.
The forces behind globalism are remorseless and their goals apparently are the creation of a world money and a world central bank among other facilities.
If one wants to invest in this world as it is, it is important to recognize the larger manipulations and to react to them. For this reason, over half a decade ago now, we created a strategy called VESTS – The Visible Elite Super Tendencies Strategy.
You can read about it in my book High Alert (free to Daily Bell members, here), and I am now working on another book that will further introduce and refine the concept. In the Daily Bell Glossary we describe VESTS thus:
VESTS is a three-part strategy designed to take advantage of the reality of investing rather than the dominant social themes that have been propounded regarding investment marketplaces.
The memes surrounding investing are many but perhaps the most pervasive is the idea that the market works by itself and is the product of a variety of uninflected inputs. In fact, the market moves based on a series of power elite decisions …
Crashes occur when rates have stayed down too long and booms are a product of low rates as well. Rates rarely move up in a central bank environment and thus the elite-aware investor will constantly try to ascertain where in the rate-cycle a given market is situated.
But in a larger sense, an investor who wants to adapt knowledge about the power elite to his or her portfolio can utilize a three-part system as suggested in High Alert.
Use the various components − overlays − of VESTS like a compass, to provide a direction when faced with the difficult passage of the later 2000s and beyond.
I recommend to anyone reading this editorial that he or she become familiar with the VESTS concept. It is only by recognizing the reality of markets and their inevitable manipulation that we can make informed decisions about the business cycle, sectors and stocks.
It is perfectly possible to make money in a controlled and manipulated market but not if one clings to the fiction that such markets are controlled by the free market itself. They are not. Central banking money flows and to a lesser extent dominant social themes sway markets and determine profit and loss.
Understand these issues – as Matt Taibbi is beginning to – and you will be far better equipped to venture into the deep waters of securities trading and market arbitrage. When investing, it is far better to face reality than to avoid it. Use VESTS as a tool to help enhance your understanding of the Way the World Really Works.
I personally recommend the concept to anyone – including investigative journalists.
