Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Does The Economy Need a Referee?

Economics / Economic Theory Oct 20, 2011 - 03:39 AM GMT

By: Jeff_Berwick


Best Financial Markets Analysis ArticleI recently appeared on Max Keiser’s "On The Edge" program.  Unbeknownst to the viewer, we were having major communication problems.  Max only could hear a small portion of what I said and I, likewise.  But, right at the very end of the interview the communications worked again… that’s when the interview finally got interesting.  Max stated that we “need a referee” in the economy.  I replied, “I disagree.  We don’t need a referee, I’m an anarchist…”

That was when the interview suddenly ended.  It’s too bad because at that point it had just gotten quite interesting.

Max was parroting a fairly typical statist argument that we need a neutral arbiter, like government, to have a monopoly of force to act as a “referee” to protect the exploited from being devoured by the exploiters, and from all of humanity devolving into eating each other.  This, simply is not the case.

First: Life isn’t a game, Max.  And all a coercive referee does is make things worse.  But, to go along with Max's analogy and to make that point, let’s look at some sports and how the rules and regulations influence their participants.
Or, as they say everywhere else in the world except the US and Canada: football.

In soccer, goals could be said to be a scarce resource.  Unlike a game like basketball, where there are hundreds of scores per game, in soccer there is often only one or two.  Like all games, soccer has a referee, and because goals are such a scarce resource the urge to manipulate the referee through diving is very high.

Furthermore, because there are very strict rules on things like physical contact and fighting it also encourages the participants to go to extremes in their attempts to manipulate the referee without fear of major repercussions.  This is what makes soccer players roll around on the ground like they just had their kneecaps blown off by a sniper rifle when even the slightest of contact occurs.  See the following video to see this isn't even an exaggeration!

Conclusion: When resources are tight and the referee plays such a big role in who can access those resources AND when there are very strict laws on any sort of contact it makes the participants act completely unnaturally and in immoral ways.


In ice hockey, goals are quite a scarce resource as well, but unlike in soccer the rules are not so strict on contact and self-policing.  In fact, fighting just gets you five minutes sitting in a box.

In this case there are much, much less occurrences of diving.  The reason is that if you do it there is a very good chance that a man nearly twice your size will come and beat you into submission and in many cases he won't even be penalized for it.

Because of this, rather than rolling around on the ice after being hit, because the referee has a smaller amount of say on who gets the scarce resources AND because you can get beaten up pretty bad for trying to manipulate the ref, hockey players have been known to play through broken legs, having 7 of their front teeth knocked out at one time and more.  In other words, by having the players police themselves there is far less “crime” and immoral action.
In Ultimate Fighting, there are almost no rules and the referee rarely has any say in the outcome of the fight.  In the UFC, fighters are highly respectful and usually pick up their opponent after defeating them, make sure he is okay and then they grab the microphone to tell the crowd what a great fighter and man he is.

Here, with almost no referee and no rules the people act highly civilized, proud and humble.

Conclusion?  Even in sports little or no refereeing is preferable to making the participants act civilized and with honor.

But, does the economy need a referee?
What Max is missing here is that the referee is the cause of all the problems we are witnessing in the financial world today.

In Max’s world, the referee is the state, and it is supposed to be a neutral arbiter of disputes between members in society.  In other words, in Max’s world, the state – a territorial monopoly on force that has never been used for good – is benign and good.  It is the classical left wing reaction to the current state of affairs.  It represents the views of many of the Occupy Wall Street protesters.

Max believes that the bankers control every aspect of our lives and the economy... and that in the end we control the state.  But these are scarcely half truths.  In reality, the state is used by the bankers to rig the playing field and to protect them from the real check on their affairs: free market competition.

Let’s not forget, the fractional reserve banking system is centralized and backstopped by government protections, like legal tender laws or monetary policy.

The referee was used to create this artificial, non-free market financial system where profits are private but losses are socialized.  There would be no investment banks that were massive and highly leveraged without the “referee” protecting them from competition and offering them the backstop to cover their losses when they do ultimately collapse... of course, all in the name of protecting the consumer.

Ludwig von Mises and Murray Rothbard argued that the best way to prevent inflation was not by outlawing it, or by forcing the central bank to adhere to some set of standards, which they would never do anyway, but rather by eliminating the legislation created by government (the “act”) that effectively cartelizes the industry (this is effectively state capitalism...aka fascism, corporatism, cronyism, etc.; as opposed to free market capitalism which precludes the use of initiatory violence or coercion).

Only under genuinely competitive free banking – where there is no central bank or legislation of any kind to help sustain fractional reserve banking -  would inflation not exist.  Each bank would worry about being called by its competitor if it over-inflated.  There’d be no one to bail them out.  Thus, they would not engage in the policy to begin with... it would be self destructive.

Instead, in today's world, the bankers set out to exchange favors with government.  The banks get their protection from competition, their bailout funds, and the ability to create deposits fraudulently (none of which could happen under a genuinely competitive environment) and the government gets a blank check; and they are in it together to keep it going as long as they possibly can.

Referee?  Hah.


The consumer’s best protection from exploitation and other shenanigans has always been competition.

Fascism, which is not the same as militarism, though it does lead to militarism, is a marriage between the statist left and the statist right; for the left it is the most practical application of socialism; for the right it is the most efficient means to protectionism and for “conquering” markets overseas.

The “referee” is largely the problem today.  It obscures the immoral reality and nature of the state.  The state can never be a neutral arbiter.  Life is not a zero sum game.  The free market is itself the best medium for democracy.  Every dollar counts in the market.  You can’t say that about every vote.  Those evil bankers that Max so despises fear competition more than they fear the referee.  And by even suggesting that the state can be a benign force for good Max is doing the bankers a great service.  He is fooling many into thinking the referee works for us, not the elite.

The free market system works because it is anarchistic; not because of the quality of the refereeing.

An anarchistic society would be one that is free of statist coercion, economic depressions, legislative injustice, and even waste.  It is not a vote for lawlessness and chaos.  The statist apologists like to argue that it represents just that.  But in fact it is the state itself that is the source of chaos.

We are seeing it everywhere in the world today.

Don’t be fooled into thinking that the banking elite is responsible for all of it, or that anyone could be exploited in a voluntary society.  If you want to check the bad guys, all you need to do is unleash the forces of competition...the people’s choice.

Until we see that as a society we will continue to have wars, chaos, poverty and turmoil.  In sports, the referee is often vilified and hated.  We need to take this approach with life's referee, the government, if we want a prosperous future.

The referee in life and the economy doesn't help make the game better, it destroys it.

 Subscribe today to become a part of our community of dollar crash survivors.

The Dollar Vigilante is a free-market financial newsletter focused on covering all aspects of the ongoing financial collapse. The newsletter has news, information and analysis on investments for safety and for profit during the collapse including investments in gold, silver, energy and agriculture commodities and publicly traded stocks. As well, the newsletter covers other aspects including expatriation, both financially and physically and news and info on health, safety and other ways to survive the coming collapse of the US Dollar safely and comfortably. The Dollar Vigilante offers a free newsletter at

© 2011 Copyright Jeff Berwick - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules