The Central Banks, how money is created

Here's another must see, a 5 part animation and narration about the history of money, how money is really created and what the dangers are of our current money system.

Suitable for all audiences. If your a free-market-at-any-cost freak, then this will annoy you. Watch it anyway.



The odd thing is that money is created from debt. If you get a mortgage, that money is created by your obligation. The gov't only creates coinage, the banks create the money. Without all this debt, the world would have less money in circulation. So Bush is thinking, "OK, let's make money ..." and gets out Uncle Sam's credit card again.

(Sidenote: serval hundred billion physical US dollars are outside of the US. most virtual US dollars are definitely outside of the US, right ?)

The clincher is when it is explained that this debt only creates the money in the world to pay the principal, and then we all have to squabble to find the money to pay the interest.

So the existence of interest demands the economy grow (or inflate) to meet that. Which means the world has to continually grow its economy. Oh wait, then there's all the fucking, and that 's what creates all these people and really creates the need for growth. Hmm. OK, we have to find new worlds to inhabit.

2, then 3,4,5 :
http://www.youtube.com/watch?v=hfXavRTM4Fg

Market makers vs. the scalpers

This is a demo of FutureScalper software. It reminds me of Harold and the Purple Crayon.



(YM)

The interesting thing to note here is his commentary on what the market makers are doing and how much they are controlling these 10 minute oscillations. They are filling inventory and then selling it out again. They are aware who the retail people are, and yet many of the retail traders can't follow the market maker's intentions. FutureScalper seems to have some way to pick out who is who. I'm not sure how yet.

A friend of mine— a well known acid house producer — surprised me by telling me he used to be a runner at the CBOT. Like actually running back and forth, making markets. He explained that if you had any math skills like say any average drug dealer might, then it was pretty easy to make loot.

Scalping isn't the most glamorous end of the financial industry. They are essentially bandits, enabled by the electronic trading networks. They don't really serve a purpose in the eco-system other than providing liquidity. None of them has any opinion on the things they trade, they go with their friend the trend.

The market makers well organized bandits. They also provide liquidity, and they charge dearly for it by maintaining the bid-ask spread. And they keep things difficult for the scalpers which is good for everybody else. It shouldn't be easy or everybody would be walking off with the world's financial resources. They do maintain order in the markets, but I'm sure they do plenty of dirty work too.

Most stock traders do a lot of analyzing, arguing and fretting. The company's weaknesses get exposed and tested, and that's good. Its like having a lot of very motivated amateurs checking your work for you. Its probably annoying too, but these guys can also get all irrationally exuberant on your behalf, and then you get market cap. Then they sell and walk away.

OK, here's another thing scalpers do: most of them fail or take a long time learning. Many of them fail to beat the market. So the market takes their gambling cash.

In the end the hedge funds siphon off all the alpha anyway. ;) right ?

How big money manipulates the market

Jim Cramer — at least he's honest. I usually see stocks plummet shortly after he gasses them up. Here's a classic clip; he's explaining how some hedge funds operate. If they have options expiring and the underlying is not at the right price, they would try to talk the stock down, and spend some money shorting it ($5 million he says) or get some analysts and press to play up some bad gossip.



He also notes that for not too much money you could get the future market to go up or down in the morning so that the obligatory "futures up, stocks set to open higher" headlines can get run. So pay no attention to those. In fact it might be just to get things optimistic, get the buyers in there and then whoever is running the operation for the day can pull the plug on the market and suck down all the suckers.

Moral:

• If big money is doing something, get out of the way or find a way to ride the wave.
• Don't take news at face value.
• Even if you are only trading equities, you should know what the options markets are doing. A lot of big money is there and it has a deep effect on the underlying. More on that later.

Artha - the pursuit of wealth without attachment

The name Artha comes from one of the four goals of life in Hinduism. It is the pursuit of wealth. Wealth is necessary to live. Splendid things are splendid. Mankind has pulled off some amazing things through Wealth. Good and positive things can be achieved with wealth.

This is a blog about finance, stocks, options, day trading, markets, issues, morals, implications, technique and specifics.

Artha is the pursuit of wealth without attachment; without losing your mind and soul in that pursuit. Greed is not the pursuit of wealth, it is another concept entirely. Greed causes you to make mistakes in a trade because you lose perspective.

Wealth is good. Desire and the pursuit of wealth is good. Its the driving motivating force behind many of the amazing achievements of mankind.

Greed is not good.

One of my favorite slogans: "You don't have to fuck people over to survive." This doesn't mean you don't compete or even aggressively compete. Struggle and competition is part of human existence. If you install a market into a small agrarian economy it dramatically increases the wealth. Trading is everywhere, even in art.

But you don't have to destroy somebody else just to obtain slightly better margins. And you certainly don't need to run an economy based on short term margins while setting the stage for massive financial disaster once you move onto your next job. The finance industry naturally attracts lots of people who really don't get that.

And in case you are wondering, the other 3 pursuits in the life of a Hindu:

Kama - desire, especially sexual desire. There is a book called the Kama Sutra. Perhaps you have heard of it. Desire can also get out of control and transform into lust and make you do all kinds of stupid shit. But sex and desire are a strong component in Love, and people ... Love is good.

Dharma - in this context it means religious duty, or the path that you are obligated to follow to transform your life and your world. It also refers to the technology of freeing yourself from attachment.

Moksha - salvation, the cessation of delusion. aka Nirvana. In the classical life of a Hindi you focus on Moksha in your later years; sometimes even taking a vow of poverty (leaving the Artha to your wife and going wandering with a begging bowl). The experiences of wealth and desire teach you why you need to be unattached, why your head and soul need to be clear. In the world of stock trading this means getting your ass burned by your own attachment and stupidity. That is one reason why involvement in the world is necessary during your life. You can not immediately go for nirvana, you have to live a little, get burned a little, get your heart broken a few times and understand how the mechanism of desire works. Only then can you escape it.

Wealth is not an impediment to self-realization, but attachment to wealth is.