It's All Fake

Look around you. What’s real anymore?

In the world of sports, Lance Armstrong doped and an AFL team allegedly ‘forced’ injections on players. According to the government, Australian sports organisations have links to organised crime, and the world of soccer is in the midst of a match fixing scandal too. Even the NRL’s best team is caught up in problems with urine vials found in the plumbing.

The lies just keep coming. Hamburgers are full of Polish horse meat and there are less chips and more air in your packet every year. Even Hollywood has been found out over its plot in the movie Lincoln.

Over in Germany, one government big wig after the other has had their PHD withdrawn for plagiarism. Ironically, the latest victim is the education minister, and she harshly criticised the defence minister when his plagiarism was revealed not so long ago.

Spain’s Prime Minister Rajoy is embroiled in a corruption scandal involving payments. Answering the allegations, he said this:

‘Everything that has been said about me and my colleagues in the party is untrue, except for some things that have been published by some media outlets.’

At least he was being honest. But his statement soon changed, probably once he consulted his lawyers or PR advisors: ‘I need only two words: it’s false’.

In Italy, Berlusconi, who is under investigation for all sorts, is staging a political comeback.

The European parliament features salary scandals so explosive that members (MEPs) literally run into walls trying to escape media stings. And a rundown of MEP convictions is equally embarrassing.

In America, a gun in the hands of private citizens is classed as an assault rifle, while the same gun is classed as a PDW (personal defence weapon) in the hands of a government official. Not that government officials need guns these days; they can kill Americans without due process all around the world using drones.

The one thing all governments and central banks around the world have in common is that Goldman Sachs alumni dominate positions of power.

Don’t expect any clarity from the media. The Huffington Post had this as their lead website story:


But when you get to the actual story, you find out that Fox News is far more trusted than its competitors, except the government funded PBS!

In the world of finance and economics it just gets worse. The world’s most important interest rates, known as LIBOR, turned out to be manipulated. The British government has fined the bank RBS for the manipulation, even though the British government owns RBS.

Just how did LIBOR get manipulated? Well, LIBOR is calculated as an average of the submissions made by banks. If a bank bets that LIBOR will rise, all it has to do is submit a higher rate and the average will rise.

Conveniently, the guys who make bets on LIBOR happened to sit behind the guys who made the LIBOR submissions. On sick days, the LIBOR gamblers even submitted the LIBOR rates for their under-the-weather colleagues! ‘It’s just amazing how libor fixing can make you that much money,’ one banker told another.

Of course, the LIBOR manipulators aren’t the biggest manipulators out there. Federal Reserve Chairman Ben Bernanke is reportedly quite miffed that he has competition when it comes to interest rate manipulation:

Source: Grant’s Interest Rate Observer

Not content with manipulating the world’s interest rates, central bankers have turned to manipulating the money supply, bonds, mortgage bonds, currencies, and the stock market. Why anyone thinks about these markets in logical free market terms anymore is a question nobody can answer.

That leaves the poor ratings agencies in a pickle. The ratings they provided proved to be bogus, but the same ratings are still a centrepiece of our financial system. And if a ratings agency does have the guts to give an honest rating, it’s sued for its past mistakes.

Poor old Standard and Poors downgraded US government debt and is now in the dock. Its peers, who made the same mistakes during the financial crisis but didn’t downgrade the government, aren’t accused.

China’s government has embraced the manipulation theme. Its GDP is growing around 8% according to the official statistics. ‘Lies’ say analysts on Bloomberg:

‘Based on indicators such as consumer consumption and electric power usage, China’s gross domestic product probably grew 3 percent to 4 percent last year, Eaton Corp. Chief Executive Officer Sandy Cutler said yesterday in a telephone interview. Growth is accelerating now that China is past the distractions from its leadership change, he said.

‘”That’s what we and so many multinational companies have been feeling there in China for the last year and a half, the economy really hasn’t been growing at 7 or 8 percent,” Cutler said. “If we could get back to an 8 percent growth rate in China for 2013, that would be a pretty darn good year.”

‘Mark Williams and Qinwei Wang, economists with Capital Economics Ltd. in London, wrote in October that China’s third- quarter economic growth of 7.4 percent was “implausible.” Standard Chartered said in October its analysis indicated the economy expanded 6.5 percent in the quarter.’

In Argentina, you aren’t allowed to disagree with the official government statistics. That didn’t stop the Argentinean President from laughing at American students when they quizzed her about the Argentina’s dodgy inflation numbers. She asked what America’s inflation rate was and said, ‘Come on! And you believe that?’

When governments stop pretending their statistics are real and point out everyone else is just as bad, you know the world is in trouble. They no longer have to hide their crimes.

If you think we’re immune from all this, you’re wrong. For example, Australia’s mortgage industry has its lies bubbling to the surface at an impressive rate.

Brisbane based Wickham Securities has been ‘likened to [a] ponzi-scheme’, Victoria’s Banksia collapsed and now South Australia’s Angas Securities ‘has announced that one-third of its loans are in arrears.’ Meanwhile, the Financial Ombudsman Service is receiving 666 new sub-prime complaints per week, according to a consumer advocacy group.

Own What’s Real

The best thing you can do in the face of all this is buy gold. Gold is real and it isn’t dependent on anyone else. It’s yours and you have it. There aren’t many valuable assets out there you can say the same thing of.

But even owning gold, you’re not completely safe. There are far more claims on gold than there is actual gold. Even governments have figured this out. They are no longer trusting each other.

Germany and Venezuela are repatriating their gold, triggering similar demands from citizens around the world. Venezuela and Vietnam have banned gold exports, while China has done so in all but name.

Even when people do manage to get their hands on physical gold, it can be full of tungsten. One Markets and Money reader emailed in reporting he found a company in China willing to provide the service of gold plating imitation bullion bars.

The biggest reason for owning gold isn’t anything to do with gold itself. It’s more about how much of a disaster everything else is. More on that next week.

Until next week,

Nickolai Hubble.
Markets and Money Weekend Edition

ALSO THIS WEEK in Markets and Money

The Great Rotation Into Stocks
By Dan Denning

The machine that markets stocks to investors and peddles statistics to justify them for the long run is gearing up again. This time, its main message is that is a ‘Great Rotation’ out of cash and bonds and into stocks. Why? Because that’s what you do with your money when expectations about the future are positive! You take risk! That is a lot of lipstick and rouge for a very fat and ugly pig.

US-China Relations: War in 2013?
By Addison Wiggin

The threat of war could be sufficient to power the US defense industry’s profit growth for many years. We would not be tackling this grim topic – nor engaging in the financial market version of grave-dancing – if the suits and uniforms in Washington understood that China is merely implementing its own version of the Monroe Doctrine

Uranium: The Commodity Like Gold Ten Years Ago
By Bryon King

‘Yellowcake,’ said one, ‘is comparable to where gold was 10 years ago. We’re looking at prices four-six times higher in the out years.’ That’s quite a claim – US$150-250 per pound – and if it works out, it makes great news for uranium producers. You know, the guys that are already producing the stuff.

Market Migrations: The Hunt for Capital Gains
By Dan Denning

Negative real interest rates – the financial repression which hurts savers but allows the government to run and finance deficits – will, at some point, drive investors out of the perceived safety of bonds and into the hunt for capital gains. After all, if you’re not making any money and still taking a lot of risk, then you might as well be in an asset class where you can actually beat inflation.

Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like.

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