After an ill-advised investment in grain futures in the late 80’s, I became more convinced than ever before that small investors are at the mercy of large investors. Not just in commodities, but in other markets as well. If your timing happens to coincide with that of the large corporations and the wealthy, you profit. If not, they take your money.
In other words, all markets are inherently rigged. Because large corporations and the wealthy gamble such large amounts of money, they control the price of commodities and securities.
We’ve seen this play out in a variety of ways since 1999. That was the year President Clinton caved to the big money lobby (reported to have spent $300 million over 25 years) and a Republican-controlled Congress by signing a bill that repealed the Glass-Steagall Act. According to the likes of former Fed Chairman Alan Greenspan, former Senator Phil Gramm and former Treasury Secretary Robert Rubin, repealing the law would “free” Wall Street from onerous regulation so the banks could “innovate” and grow.
A year later, Clinton signed another such onerous bill, The Commodity Futures Modernization Act of 2000. Ironically, that was also the year of the dot.com crash.
Our financial markets have taken us on a frightening roller coaster ride ever since.
In my opinion, these bills turned financial markets into international high stakes casinos with a variety of complex games that allow the house and the big players to constantly adjust the rules in order to skim more money from suckers like us.
We’ve seen the big players run up the price of commodities, such as gold and oil, at the expense of ordinary citizens. We’ve seen them pump up the real estate market with subprime mortgages designed to fail. When the inevitable happened, the institutions holding those mortgages were bailed out by taxpayers. They then stepped in and snapped up foreclosed homes at a fraction of their actual value. These events also resulted in the loss of trillions by pension plans and the holders of 401ks.
So, thanks to the gambling of financial institutions, millions of ordinary citizens lost their homes and their financial futures at the same time.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was designed to protect us from such risky and unethical behavior by financial institutions. Signed into law in 2010, Teapublicans have not allowed the act to be fully implemented. Even worse, they are working on behalf of their Wall Street benefactors to dismantle the bill. Even some freshmen Democrats seem to have fallen under the spell of Wall Street and the promise of campaign contributions. They recently voted for a bill written almost entirely by the banksters’ lobbyists that would water down Dodd-Frank.
For their part, financial institutions seem totally unphased by any regulations. In the past year, we learned that financial institutions manipulated LIBOR (London Interbank Offered Rate) the benchmark interest rate that determines the international cost of borrowing. After stealing billions, a handful of the big banks involved in the scandal have paid fines that amount to a stern slap on the wrist. Of course, such penalties only encourage financial traders to continue their games.
Now we’re learning of yet another rigged game – the currency market (aka the Foreign Exchange market). According to a Bloomberg report, “traders at banks around the world have regularly worked together for ‘at least a decade’ to move a key benchmark currency rate in ways that profit them and hurt their clients.”
It seems the old adage that “it takes money to make money” has never been more appropriate.