Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Government Shutdown Ends – Markets Ignore Looming Debt and Bond Market Threat - 23rd Jan 18
Stock Risks to Watch: Choose Your Bear Market Dashboard - 23rd Jan 18
Worse than Watergate - Release the Memo - Investigate Uranium One - 23rd Jan 18
CAT Stock Bouncing after JPM Upgrade How High and How Long Can This CAT Jump? - 23rd Jan 18
Why Banks Will Be Slammed In The Next Crisis—And That May Be Good News - 23rd Jan 18
Medicare Premiums Are A Shared Pool - Coming Changes That Will Transform Retirement - 23rd Jan 18
Charged Atmosphere of Heavy Police and Security Presence at Sheffield Street Tree Felling Protests - 23rd Jan 18
Pension Crisis And Deficit of £2.6 Billion At Carillion To Impact UK - 22nd Jan 18
Two Factors for Gold That You Don’t Want to Miss - 22nd Jan 18
Why You Must Own Silver in 2018 - 22nd Jan 18
This Could Be The Hottest Mining Stock Of 2018 - 22nd Jan 18
Stock Index Trend Trade Setups for the SP500 & NASDAQ - 22nd Jan 18
Stock Market Deceleration / Distribution - 22nd Jan 18
US Markets vs Govt Shutdown: Stock Markets at all time highs - 22nd Jan 18
Land Rover Discovery Sport - 1 Month Driving Test Review - 22nd Jan 18
Why should you use high-quality YouTube to mp3 converter? - 22nd Jan 18
Silver As Strategic Metal: Why Its Price Will Soar - 21st Jan 18
Stocks, Gold and Interest Rates Three Amigos Ride On - 21st Jan 18
Why Sometimes, "Beating the S&P 500" Isn't Good Enough - 21st Jan 18
Bunnies and Geckos of Sheffield Street Tree Fellings Protests Explained - 21st Jan 18
Jim Rickards: Next Financial Panic Will Be the Biggest of All, with Only One Place to Turn… - 20th Jan 18
Macro Trend Changes for Gold in 2018 and Beyond - Empire Club of Canada - 20th Jan 18
Top 5 Trader Information Sources for Timely, Successful Investing - 20th Jan 18
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

The True Parasites Of Finance

Stock-Markets / Financial Markets 2014 May 14, 2014 - 03:44 AM GMT

By: Raul_I_Meijer

Stock-Markets

This morning I saw an article by Barry Ritholtz on Bloomberg that got my few remaining active neurons going (or I think it was them). The title alone, The Parasites of Finance, did that, actually. I sort of knew, since I’ve known Barry’s work at the Big Picture site for quite some time, what he would talk about, and I knew I wouldn’t – fully – agree.

Or rather, it’s like this: I have nothing against Barry, and he does make some valid points in the article, but in my view his focus is too narrow for the title he’s chosen, willingly or not. But then Barry works in finance, and I don’t. For me the parasites of finance form a much larger group than for him. And that is the direct result of government policies, such as the promotion of creative fantasy accounting and the refusal to restructure debt, multiplied by the tens of trillions of dollars of future wealth that have been pumped into the financial system in the form of QE and other stimuli, lest the system collapse on the spot.


We all understand today, from the world of biology, why and how a body, a system, gets more susceptible to parasites when it becomes weaker. Well, financial stimulus of all shapes and forms, as executed over the past decade and more by governments and central banks, does just that: it makes the system weaker. This – temporarily – makes it possible for a large number of people to feed on the system (just like parasites do), and declare that from where they’re sitting, everything seems fine. But everything is not fine. The system, in this analogy, has turned into a body addicted to drugs to such an extent that without them it would risk … collapsing on the spot. The undead body of a zombie, essentially.

In short, this makes just about every investor today a parasite, if not of finance, then certainly of the financial system. Or even of society as a whole. In most cases this is not intentional, but for the end result that makes little or no difference. Everyone who owns assets of any kind at all today profits up to a point, at least on paper, from the gigantic asset bubble blown by “authorities” and their accommodative policies. That part is easy to see, so much so that it’s the only part most see. The shadow side largely remains hidden, until it will be too late. Because the shadow side lies in the future, and we live in the present. But before I stomp over him entirely, which is not at all what I want, let’s turn to Barry:

The Parasites of Finance

[..] … I am always amazed at how some business models manage to hang on despite overwhelming proof of their lack of purpose or value added. Some parts of the investment world exist simply because people don’t know better. The information is out there, but it is obscured by a relentless parade of advertising, promotion and marketing. The truth gets lost behind a smokescreen of noise and deception. Indeed, there are increasing numbers of people who are employed for just that purpose. Ignorance: It’s a job creator.

This first paragraph had me smile, because what Ritholtz says here about the (his) world of finance, for me describes our entire society. Or to put it in starker terms: to me, the entire world of finance today only exists, or continues to exist, because of a relentless parade of advertising, promotion and marketing, PR. Which makes that people don’t know better. For me it takes on the meaning that there is a relentless parade of journalists and government officials and central bankers and investors and hedge funders, etc., all hell bent on blowing such quantities of smoke up the public’s asses that the latter don’t think, or figure out, that the whole thing has become a parade of parasitical zombies, who suck the lifeblood out of society instead of creating value, something they will insist they do until their bodies crumble to ashes and evaporate.

That may sound harsh for everyone invested in something, and particularly unwelcome for finance professionals, but we can all imagine, though perhaps not all equally, what the world of finance, and society at large, would have looked like without such lovely though grossly expensive concepts as creative accounting, QE 1-1001, artificially and absurdly low interest rates, home purchase assistance plans that skirt on subprime, and with debt restructuring, defaults, bankruptcies and the like that until recently were considered normal, nay necessary. What it all would have looked like would be, to put it succinctly, more ‘normal’. More like a free market.

Not that things wouldn’t have been chaotic for a while, maybe quite a while. But does that warrant turning an entire society into a parade of zombies? Because that’s what we’re looking at now. It might be good to acknowledge who has benefited most from the entire set of extreme measures. And no matter how you look at that, you will always come back to the same group of people: those who benefit most would have risked losing most if ‘normal’ would have been the norm. That means politicians, bankers, finance professionals.

Everyone who profited most from the bubble had most to lose from it bursting. So a huge layer of virtual credit, for which your blood and sweat and tears is the collateral, was laid out on top of the imploding world of finance. That way they could all hang on and pretend everything was just hunky dory. But that won’t last, simply because it can’t. You can use creative accounting for your unemployment numbers too, but the fact remains that some 90 million working age Americans don’t work. And 60% of southern European young people don’t either.

And you need all those people to work, not just to keep them from rising up, but to make sure your society and economy produce things of actual value. That’s where the real crisis is, not in bank profits going down. But it’s not what all the measures have been aimed at, they have all been about propping up “finance” to the point where society at large could be made to believe it’s actually still standing while it’s as dead as King Tut.

It’s a policy that carries its own demise on its back. Then again, it also carries its own advertising, promotion and marketing parade. Because it makes everyone – except perhaps for the unemployed – think they are richer than they actually are. Temporarily. Not just investors, but really everybody. Because proper financial policy, the kind where the bankrupt actually go bankrupt, would cause a giant reset of the entire economy. Pensions funds are all invested up to their necks in assets that would have lost a lot of value if Bernanke and his ilk would not have taken their grandchildren’s money to spend it today on propping up their undead friends. Home prices would have fallen so much that over half the nation would have been underwater much faster than an Antarctic melt could have put them.

So why not just go for the Lord Keynes stimulus parade? Because it’s all fake. It’s virtual. It’s zombie. And it’s a way for the financial industry to transfer its debts to the rest of us. That way when the zombies start exploding and spewing around the gory green slimy juices that run in their veins, they’ll land on us, not them. Keynesian stimulus policies are utterly destructive to a society if they are not accompanied by debt restructuring, they become nothing but a free for all for the few. Because if that happens, stimulus only serves to keep the undead alive. And no matter how much it may hurt in the short term, the undead are not a good foundation to build a healthy society on. They’re too squishy.

Today, we are all zombies, to one degree or another. And we’re all parasites, feeding on the temporary feel-good effects of the stimulus that in turn sucks the (life)blood and tears out of our children. The question then becomes: would you prefer to have less spending money today, or to leave your kids in utter misery? And no, you can’t have both. That’s just PR.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2014 Copyright Raul I Meijer - 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.
Raul Ilargi Meijer Archive

© 2005-2018 http://www.MarketOracle.co.uk - 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