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Tuesday, December 21, 2010

Financial Market Casino

A lot of people say "The financial markets are one big casino." That analogy is incomplete. It's more accurate to say "The financial markets are a rigged casino."

If you go to a casino and play craps and bet intelligently, the casino's advantage is 1% or less. The casino doesn't need to cheat. The odds of the game are stacked in their favor. Without cheating, and if the bet size is small compared to the casino's bankroll, then the casino is statistically guaranteed to win. They might have bad days, but they're mathematically guaranteed to win.

The banksters aren't content with 1%. They cheat.

The casino cheats. Certain privileged players are allowed to win, giving the illusion that it's fair. Having some winners helps convince the suckers it's fair.

Suppose you're playing bankster poker. You get a royal flush. The dealer says "You lose. J8752 beats a royal flush." A slave would say "I'm sorry for my mistake. Thanks for correcting me!"

It isn't just a rigged casino. Once in a while, the government gives favored players free money. They stack up their government-gift chips and say "Look at what a smart gambler I am!" The government doesn't disclose how many free chips each player gets. Even the cheaters don't know how much their fellow cheaters got.

Once in awhile, one of the less influential cheaters is exposed and arrested. The other cheaters say "This proves that all cheaters get caught! We aren't cheaters. We would have been caught if we were cheating!"

Even though the game is hopelessly rigged, sometimes an honest and intelligent person wins. The cheaters say "How did that guy win? He must be cheating without our permission!" That person is convicted and jailed.

"The financial markets are a casino." is an unfair analogy. Most casinos are content to win their 1% advantage, and don't otherwise cheat. The financial markets are a rigged casino. Certain favored players get free chips from the government. They also cheat and win.

1 comment:

Anonymous said...

Excellent post!

Keep up the good work.

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