Rigged Market Revolt

GoldSilver.com: Let's do a coin flip. Heads or tails? You call it!

YOU: Tails never fails!

GoldSilver.com: Tails it is, nice call, you win!

YOU: Do I win the coin?

GoldSilver.com: Ah no... quick quiz! Lets say we play this game 62 more times in a row. What would be your chances of perfectly guessing the outcome of all sixty-three coin flips?

YOU: Well in every coin flip one has a fifty percent chance of guessing the outcome. So it's basic math, 1/2 to the 63rd power, or a 0.0000000000000000138% chance of perfectly guessing the outcome of all sixty-three-coin flips.

GoldSilver.com: Wow you are not only correct - you are a walking human calculator! Now let's suppose you invite three of your closest cohorts to take part in this 63 round coin flip guessing game. What are the chances that all four of you would perfectly guess the outcome of all sixty-three-coin flips?

YOU: Simple, there would be 63 half-probability rounds with 4 guessers, a total of 252 separate fifty percent chance guesses. Again basic math, 1/2 to the 252nd power, or a 0.000000000000000000000000000000000000000000000000000000000000000000000000138% chance of perfection by the four guessers.

GoldSilver.com: Amazing! You're almost as sharp as the bankers at Goldman Sachs, JP Morgan, Citigroup, and Bank of America.

YOU: I take offense to that statement; those bankers are not more brilliant than you or I. Their profits are fixed, baked into the cake. For instance, let's say you agreed to lend me trillions of dollars at no cost, an interest rate of zero percent. Then I turn around and lend you back those same trillions, but this time you agree to pay me 3% interest on the dollar. In such a scenario it would be very difficult for me not to make a profit every day. The probability of my positive cash flows, day in, day out, would be rigid, rigged, and a lot less chancy than mere coin flip outcomes.  

May 13, 2010 - Yahoo Finance

The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.

For the 63 straight trading days in Q1, in other words, Goldman Sachs, JP Morgan, Bank of America, and Citigroup made money trading for their own accounts.

Trading, of course, is supposed to be a risky business: You win some, you lose some. That's how traders justify their gargantuan bonuses--their jobs are so risky that they deserve to be paid millions for protecting their firms' precious capital.

But these days, trading isn't risky at all. In fact, it's safer than walking down the street.

Why?

Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What's more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits--by borrowing from the taxpayer and then lending back to the taxpayer.

GoldSilver.com: Pop Quiz! What's the last thing a central banker would like to see you do with your savings?

YOU: They hate it when I buy physical gold and silver coins and bars. They don't like that I have real money, the stuff they can't print. Today, for as much as I can help it, my savings will be nowhere near them. My two precious money metals, physical gold and silver, are the antithesis to the central bankers' collapsing fiat debt ridden banking system. Plus I like to see central bankers squirm and sweat, I rebuke rigged markets, I will continue to buy physical gold and silver bullion coins and bars.  And with annual average returns of 18.73% per year for gold and 19.68% for silver since 2002, it has beaten the heck out of holding my savings in the bank, stock market, or bonds regardless!  Heads I win.  Tails I win.