The Fed is the Market, Until Someone Bigger Comes Along..
UPDATE:This editorial was written 3 days ago in reaction to reading the Zerohedge post As Bitcoin Nears $10,000 “Central Banks Kept Up At Night”
by Vince Lanci
“Free markets for free men”- patch worn on the Nymex floor during Iraqi war.
The reality: We were cheerleaders for Halliburton and naively thought we were on the same team. Money that can’t cross borders freely for its citizenry is not a free market. There was a time before each government sought to secure its tax base through FIAT that money was universal.
That time, when gold was money, is back. But gold isn’t currency. BTC is currency. And their combination, whether in a single product, or on 2 different fronts, will take the fight for economic freedom to the Fed doorstep.
Economic freedom is a right corporations enjoy but most citizens do not. And those that do, must pay a tax and withstand a full body cavity search to play. Meanwhile, the west’s corporate controlled government enables its own demise via these uneven playing fields. No matter, the last US middle class people will pay a 300% income tax to cover government spending we bet.
The Fed Has Forgotten The Market’s Basic Rules
The axiom “no one is bigger than the market” has held true forever. When the 2009 stock market reinflation began to be understood by professional traders as the Fed becoming the ultimate backstop to the market, that axiom was discarded by many. And that was wrong.
You see, the largest marketmaker, backstop, supporter, is always eventually supplanted by a successor. The king will die. Long live the next king.
The thing that will eventually dethrone the US govt as market backstop may not come as many see it coming including myself : via a fundamental reckoning or a credit downgrade. No, those things may be resultant of an outside disruptive force on the very nature of centralized power.
It may come like it does in most markets; when the big fish has a position that leaves it too little room to maneuver ( debt service etc) and then a bigger fish comes along that can take advantage of the next thing. That fish could be Russia, China, or a state controlled capitalist set up that can mandate controls more easily to what it wants. Meanwhile the west’s pesky democracy, or what’s left of it will need to be eradicated. Then they can put down any egalitarian economic forces.
So in the west, with corporate controlled governments, the king will be dethroned only by true economic grass roots revolution. And that will only happen if they do not put us down before hand.
Decentralization Kills Power Abuse
Either way the killer concept that will be used is the same thing that has disrupted how we communicate, fight wars, and handle work. That is decentralization as the ultimate disruptor ofcoalesced incumbent power. The playing field will be leveled.
That is what BTC and it’s ilk are. They represent the re- democratization of money. This will openup the markets to a bigger, dare we say it, more fair and definitely more like the real invisible hand that free economic markets aspire to.
The question is how will the incumbent central bankers handle it. It certainly won’t be to our benefit. I write as if the success of a truly free economic society are a given. But they are not.
Control of money is being threatened by a grass roots movement. State Run capitalism will just ban or claim the new tool as its own. China and Russia are already doing oil for gold deals via Blockchain. And why not? They own their banks. The western governments will try to co-opt, restrict, demonize, and finally replace the money of choice with a castrated version that offers convenience at the price of losing that rediscovered financial freedom.
Those on power have no incentive to say “we are wrong, we accede to the public’s desire for an evolutionary government.” Lol.
This will end badly when the Fed gets its shit together.
When that happens, expect a multi-year smack down attempt as they’ve seek to tame crypto currencies they can’t own. And when you think it is over, that is when it is just beginning. The tech ain’t going away.
But if there is one thing that will make enemy governments unite in defense, it will be the true democratic society that can happen. It won’t be martians that bring governments together. It will be it’s own citizens chafing at modern feudalism.
About the Author: Vince Lanci has 27 years’ experience trading Commodity Derivatives. Retired from active trading in 2008, Vince now manages personal investments through his Echobay entity. He advises natural resource firms on market risk. He pioneered and executed the Nat Gas EOO arbitrage trade of 2006 to 2008, netting over $90MM for a NYC hedge fund before retiring. Over the years, his expertise and testimony have been requested in energy, precious metals, and derivative fraud cases. Lanci is known for his passion in identifying unfairness in market structure and uneven playing fields. He is a frequent contributor to Zerohedge and Marketslant on such topics. Vince contributes to Bloomberg and Reuters finance articles as well. He continues to lead the Soren K. Group of writers on Marketslant.