The Market Standoff

Like I've written on recently I think the only reason that markets haven't already collapsed utterly is that incomplete or poor assumptions on the economy are being used by machine trading platforms, which dominate the trading taking place.

The algorithms the machines are trading upon are based mostly on fair-weather models which just cannot see the dire situation ahead for the real economy where people need real food (and toilet paper).

Back-testing (on historical data) which these algorithms are built upon will not help see forwards since situations such as previous crises like the GFC resulted in massive market interference by the Federal Reserve. The interventions of the Fed in markets over the past decade has distorted outcomes so much so that any assumptions of V shaped recoveries are completely and utterly insane this time in my opinion.

I won't discuss the specifics of why as I have already touched upon it with my posts on the insanity of printing more money as debt to cure an inherent massive debt problem and the inflationary pressures that the tsunami of money that ultimately flows into the stock market has the potential to cause.

What I want to discuss however is the current situation where even if the human controllers of the machines decide that it's time to get out - that they are not going to be able to do it without causing a collapse of truly unseen proportions. They're effectively trapped like water is trapped in a dam.

We are watching a kind of wild west standoff where no one is game to pull the trigger to exit because the consequences of one entity panicking is that the rush to get out causes a guaranteed obliteration of everyone in short order.

Not only is there nowhere else to really go by exiting the stock market - but the exit will reveal how silly current prices are as there will be no bid and sadly there is little value to be bought as the prices to which the markets corrected in March were still an order of magnitude higher than traditionally accepted price to earnings ratios.

Remember that companies on the stock market are priced on the margin. A companies value is not based on the sale of its entire shares all at once but rather on simply the last share sold.

It won't take many of these high frequency trading machines to be triggered to lead to a meltdown of the market - explaining why circuit breaker conditions exist in the stock markets nowadays. Drops of 15% or more result in trading halts to give the human controllers and so called investors a chance to take stock of what is happening.

Unfortunately I think this time there won't be a floor. Just like the historic negative prices in oil futures we witnessed in April 2020, the price that some companies are going to fall to will astound people - when stocks people were paying hundreds of dollars per share are reduced to mere cents on the dollar it is going to leave a market wondering what on earth has happened.

When markets fall the reports always talk about $X millions or billions have been "lost" or "wiped out" from the stock market. In fact no money has been truly lost because there is no money in the stock market itself. The money flows between buyers and sellers and there is no vault or pool of money somewhere in the stock market itself that is being erased magically.

The value is fictitious in the sense that it is based only on what the participants (buyers and sellers) actions value it at. If there is no buyer then the value is zero, plain and simple. The money hasn't been lost - it's still out there in the economy - or is it?

There's the rub. The stock market like any other should be just a mechanism for the efficient allocation of resources based on perceived values between buyers and sellers. The buyer has the money, the seller has the stock. The price is agreed and it flows between them - it doesn't sit somewhere in the market. Markets just create the means for the flow of money - not the money or the resource itself. A market should be a price discovery mechanism - and it has to be free in order to do so. When it is manipulated or distorted then unintended consequences are inevitably triggered.

The values of shares on the stock market over the past decade have been inflated by the flow of money created ultimately by central banks. The valuations are simply a reflection of the volumes of money that have flowed through the market and a great proportion of that flow has come from all the stimulus that has been created. This is the underlying mechanism of bubbles.

The money is never in the market. It flows through and is always outside of it. A stock market crash doesn't destroy the money that has already flowed through it. It has destroyed the assumed value of the people who are left with the shares/scrip/paper/bag - whatever you want to call it when it all implodes. The money is not with them - it's with the people who sold to them - and so it's still out there somewhere. And it's unlikely to be in your hands.

That huge pool of money is still out there and will have to go somewhere.

The debt based money system means that when a unit of currency is lent into the economy it leaves behind a placeholder with the central bank balance sheet which is like a tether to the debt based money that is being used in the economy.

So the money out there can either be used to inflate some other asset to higher perceived value or it can go home to destroy its placeholder at the central bank. The value of the issued debt (what it will buy) is based solely on confidence by the holders that it has value - nothing else or more than that.

The question is where the money will go next. In the case of a hyperinflation the debt becomes so worthless that its value evaporates in people's minds so that no one wants it for anything real anymore.

That is what people need to consider most. Are nations willing to give away their real assets, resources, land etc. in exchange for paper promises?

So the standoff continues and all that is left in my opinion is waiting for when the first shot will be fired. I don't think it will be long before the delusion of the crowds are revealed and the collapse begins in earnest and collapse it must.

People who desire true freedom must understand that it must be allowed to collapse as if it is not allowed to collapse then the tragedy of perpetual slavery to the false money power will continue.

People have to wake up to the fact that they are slaves to this money power - they have been used like farm animals and are being treated exactly that way however unaware they are of it.

People are being exploited as a resource and the future that is being painted for them - of ongoing surveillance, of tracking and chips, travel and payment controls and forced medication - are equivalent to the state of a farm animal with its branding and fencing and continued exploitation. Think about it for a while and ask the question - who is your farmer?

Writers of the past have described these future dystopias in various forms - and we are on the doorstep of a future which must be created by the people - not the so called elite who have brought us to where we are right now.

Beware, beware...