Wildly Changing Dow Reveals Injustice Of Markets


Today's massive stock market rally testifies that democratic capitalism has become a bizarre way of organizing a society. We're not a democratic republic in the sense we once were, since leveraged speculation now explains our hopes and challenges more than any system of political representation. Let's be honest about it: Anytime the fate of a nation, or perhaps the world, rides on the overwhelming influence of bets made on paper assets with merely discretionary value, the system has passed the tipping point and has become irrational and unjust.

A fight to save an enterprise that uses a counterfeit (fiat) money supply to systematically wrestle assets away from the industrious and award them to those who are speculatively irresponsible is no more deserving of support than raw communism. When we run our system like it was monetary fascism, who are we to tell the world they need democratic capitalism?

When broad indices like the NYSE or S&P 500 can plunge or leap 6-10% in a single day with little regard for fundamentals, it is a sure sign that speculation has engulfed rationality. Highly volatile markets provide trading elites unjust opportunities to exploit pricing malfunctions, thus sucking capital out of the public domain and into vaults owned by those who see markets not as means of furthering the common good but as vehicles for lining their own pockets.

It is not just volatility that is the problem. Everything about today's markets reeks of manipulation and deception, and a good deal looks like financial terrorism. Just look at the Ishares silver trust chart for example (stock symbol SLV). A discerning eye quickly sees that the existent trend must reflect surreptitious price guidance, since the share price reflects an artificially induced trend with little responsiveness to the supply/demand dynamic in coinage, bullion and refined products. As such, paper silver becomes one more way of gaming the underlying economy. The same problems afflict other commodities.

The recent inflation of crude oil prices followed by a jaw-dropping rate of deflation demonstrates the ability of speculation to deform market pricing in both directions. In sync with our lust for immediate profit even if it means cannibalizing our retirement savings, we've quickly created a universe of short-side betting products. These investment products allow people with sufficient chutzpah to accelerate rates of price correction and profit enormously thereby, while the nation transitions from excess liquidity to a credit crunch. Granted, the FED was derelict in its duties by allowing an easy money policy to inflate assets during an era of collapsing investment mores. But does it justify throwing gasoline on the mutual fund fire? Hardly. Heavy shorting has moved the correction at such breakneck speed that human psychology cannot adjust to the chaos. As a result, monetary officials have moved aggressively to "stabilize" markets, socializing moral hazard and nationalizing broad swaths of the economy at taxpayer expense. This is no justice. This is civil war waged in financial markets. Neighbor against neighbor. Anything for money.

What ever happened to price discovery free from speculative distortion? What undercut the commitment to markets as efficient means of assigning value? America reveals just how far we've fallen as a nation because we don't want fair and efficient price discovery, since price distortions provide an attractive means of gaming the economy. After all, who wants to earn money through meritorious contribution when one's neighbor is raking it in by pouncing upon market malfunctions? We want markets to skew prices because this is how the real money is made. And we don't hide our guilt. We testify of it in our support of a federal tax code that shelters speculative capital gains and makes no distinctions regarding the morality or prudence of money usage.

What are we then, if not an economically immoral people? In money we trust, not God. If God allows us to destroy the value of our money in our passion for consumption and speculation, who are we to complain? If we believed in God, our soiled markets would not let us sleep at night. We would surround Capitol Hill and demand that our legislators topple our now-idolatrous markets and give us a form of capitalism consonant with the convictions of a truly great people who don't stop their ears to justice.