I have not commented on the case against FTX founder Sam Bankman-Fried because it was open and shut. But a related post on the SEC Chairman Gary Gensler caught my eye.
Sam Bankman-Fried and the SEC
The Wall Street Journal comments on Sam Bankman-Fried and the SEC
Sam Bankman-Fried charmed investors and politicians, but he wasn’t so fortunate with a federal jury. On Thursday the former FTX crypto-exchange kingpin was convicted of seven counts of fraud and money-laundering.
Mr. Gensler has since spun Mr. Bankman-Fried’s fraud as a cautionary tale of the crypto “wild West.” But regulators and prosecutors don’t need new powers to charge fraud under existing U.S. laws. And while Mr. Gensler charged crypto companies for marketing unregistered securities and operating unregistered trading platforms, that didn’t stop Mr. Bankman-Fried’s crimes.
Mr. Bankman-Fried scoffed last November to a reporter at Vox that regulators “don’t protect customers” and “can’t actually distinguish between good and bad.” He may have demonstrated his point. One question for Congress to investigate is whether Mr. Gensler’s preoccupation with expanding his regulatory and enforcement power caused the agency to overlook the FTX fraud in plain sight.
Gensler is so busy with demands for oversight of Bitcoin, delaying a Bitcoin ETF for no good reason. He struck out on that in court as he should have.
But where was Gensler when obvious fraud after fraud happened on his watch?
One of the few things SBF ever said that hit the mark was regulators “don’t protect customers” and “can’t actually distinguish between good and bad.” So, why do we even have them?
What About the Fed?
On a similar note, what good has the Fed ever done?
The Fed creates crisis after crisis then wants more power to fix the messes it makes. Would a free market possibly do any worse?
Fed Uncertainty Principle
Doing what it wants regardless of data is the essence of my 2008 post on The Fed Uncertainty Principle.
The Observer Affects The Observed
The Fed, in conjunction with all the players watching the Fed, distorts the economic picture. I liken this to Heisenberg’s Uncertainty Principle where observation of a subatomic particle changes the ability to measure it accurately.
The Fed, by its very existence, alters the economic horizon. Compounding the problem are all the eyes on the Fed attempting to game the system.
Fed Uncertainty Principle: The fed, by its very existence, has completely distorted the market via self-reinforcing observer/participant feedback loops. Thus, it is fatally flawed logic to suggest the Fed is simply following the market, therefore the market is to blame for the Fed’s actions. There would not be a Fed in a free market, and by implication, there would not be observer/participant feedback loops either.
Corollary Number One: The Fed has no idea where interest rates should be. Only a free market does. The Fed will be disingenuous about what it knows (nothing of use) and doesn’t know (much more than it wants to admit), particularly in times of economic stress.
Corollary Number Two: The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.
Corollary Number Three: Don’t expect the Fed to learn from past mistakes. Instead, expect the Fed to repeat them with bigger and bigger doses of exactly what created the initial problem.
Corollary Number Four: The Fed simply does not care whether its actions are illegal or not. The Fed is operating under the principle that it’s easier to get forgiveness than permission. And forgiveness is just another means to the desired power grab it is seeking.
The Fed has blown several major asset bubbles and wanted to make up for lack of prior inflation when it does not even know what inflation is.
Now the Fed gives forward guidance on their thinking and all the banks and hedge funds front run the guidance which explains the collapse of Silicon Valley Bank.
For discussion, please see The Fed Admits a Mistake in Collapse of SVB, Seeks More Power Anyway
The Fed and Gensler are alike. Both want more power. Giving it to them will create more damage, not prevent it.
I think there is one more major pump/dump around the corner in the crypto arena. Then most governments kill it for good.
After all, the dollar in it’s current form isn’t any less of a scam but, just like competing scammers, the more powerful scammer usually snuffs out the competition.
IMO, crypto is largely owned by sanctioned Oligarch’s, so I agree, as the economy falls they’ll push one more pump, then dump before retailers need to pull their money in a recession.
The FED is the overseer of the banking system.
In addition, it has two mandates: stable currency i.e. inflation management, and full employment.
These are total opposites, but amazing none of the elected representatives of the people found time to notice it.
Question: “The Fed creates crisis after crisis then wants more power to fix the messes it makes. Would a free market possibly do any worse?”
Answer: For the TBTFs, obviously yes. The Fed creates these crises by goosing the system for its friends. Any attempts to right the listing ship MUST benefit its friends. After all, if the fix hurts, then its better for the ship to sink, right?
Granted, the free market traditionally benefited the big boys, but nowhere near the extent the Fed’s intervention has done. Imagine what would happen to all those billionaires if their vast holdings weren’t propped up by daily Fed goosing? Tsk tsk.
Of course, we’d all have to hear about how a free market correction would damage the average Joe’s 401(k). And that’s the beautiful thing about our viciously corrupt system: the pitiful retirements of millions is held hostage to the Fed’s endless interventions on behalf of its billionaire friends. We MUST support the titans or our own little nest eggs get trampled.
Cute, that…!
“Question: “The Fed creates crisis after crisis then wants more power to fix the messes it makes. Would a free market possibly do any worse?””
I offer you $1,000 per week to give my friend a job, my friend, in turn, will pay me back the $1000 per week with the money he makes from you, that’s a “job creating” tax cut.
That’s the math that has exploded both Gov and household debt for 40 years.
Fed rates are the indirect result of debt to income levels.
Gov debt has increased 300% since 1980, household debt 200%.
Household debt ratio is the result of globalization/outsourcing depleting labor demand, resulting in wages rising slower than inflation. (though this year that’s changing)
This means the Fed has to cut in recessions far more than it did when the economy was less debt dependant 40+ years ago.
I will agree that the Fed and it’s bankster constituents have a bias toward increasing debt (good for bank profits), I would also stress the importance of the fiscal causes for all this debt.
It’s not the FED alone.
“Job creating” Tax cuts for the wealthy & Corporations, whom in turn created those jobs in China, India, Mexico…etc.
Congress, at the behest of the donor class, pretending that those tax cuts are economically beneficial, despite the obvious increase in Government & Household debt and wage depletion for 40 years.
Same old story, government corruption and ineptitude leads to further funding and more regulation, which in turn leads to more corruption and ineptitude. Unlike private business where failure means you go out of business, in government failure is rewarded. Thus we end up with President Poopie Pants and Vice President Kamala Deville.
Gensler in 2018 taught folks attending his MIT class that “cryptocurrencies are on par with commodities or cash and are not securities”:
link to cointelegraph.com
Gensler in 2023 is just kowtowing to the Biden administration’s War on crypto:
link to pmbug.com
There is an SEC commissioner that has a more thoughtful view on crypto, but she can’t do much by herself. She is asking the public for help:
link to sec.gov
Wow, at a glance she seems to be all but calling out corruption with her peers.
I wager she’ll soon be an “ex government official”.
Food for thought though, on what their motivator is for ignoring the crypto problem.
We live in a day & age where SCOTUS judges are rationalizing the receipt of gifts from lawyers with pending cases & refusing to recuse, so this is no shocker.
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You covered a lot of ground Mish.
– Gensler is so busy with demands for oversight of Bitcoin (What Gensler Wants is Regulation)
> SBF hit the mark, as You stated: “don’t protect customers” and “can’t actually distinguish between good and bad.” So, why do we even have regulators? “Power & Control”
– Where was Gensler when obvious fraud after fraud happened on his watch
> The Same Place: Nowhere! They Love Fraud but They Live For “Power & Control”
– On a similar note, what good has the Fed ever done
> None! Exactly the Same as Regulators: “don’t protect customers” and “can’t actually distinguish between good and bad.” So, why do we even have The Fed? “Power & Control”
– The Fed creates crisis after crisis then wants more power to fix the messes it makes. Would a free market possibly do any worse
> Free Market is the answer, but No Way will that ever happen with this Fed or any Fed. They Desire ALL “Power & Control” With a Free Market, you can’t have a Fed, so forget about it…
Fed Uncertainty Principle And Corollary Numbers One-Four Say It ALL (as usual)!!!
Thanks Mish!
The Fed is not government, or even quasi-government. It’s a bank, owned by a group of already filthy rich oligarchs. It’s purpose is to make them more money. It pretends to care about the economy, and some individuals do care (Powell may be one of them), but if they don’t, they’re removed. The owners want chaos, because the people running the government are incapable of dealing with chaos without borrowing humongous amounts of money. That makes the owners smile.
“The Fed is not government”
But, exactly as is the case with that other group of other supposed “non-government” yahoos, nominally “private” ambulance chasers: THE SOLE reason they matter, is specifically, and only, because they ARE government. Or at least Government, 100%, does their bidding, has their backs, and serves as their enforcement arm.
Absent taxes and “legal tender”/”full faith and credit” nonsense, by THE GOVERNMENT; noone would bother treating counterfeit notes by The Fed any different than they would similar counterfeit notes printed by anyone else. The Fed could still print dollars. But, absent said GOVERNMENT overreach, so could I. At which point, The Fed would cease to be a problem. Ergo: It is specifically the government and their meddling and overreach, and nothing but, which makes The Fed a problem.
Ditto if you could just ignore and tell idiot ambulance chasers to stuff it, when they wanted to rob you by forcing you to play childish courtroom dramas with pathetic little them.
It’s specifically THE GOVERNMENT; its unlimited, arbitrary overreach; and its asymmetric access to guns; and only that; which prevents more intelligent and competent people from simply routing around either of the above cancers.
Is there an UN-FIXED MARKET for something?
YES: bartering in the Wilds, the flyover states.
I have friends in those places and more and more is happening in the areas of BARTERING one’s skills, whether it be in the form of manual work, or the output of that manual work, such as CROPS where one Farmer trades Cucumbers for another Farmer’s Tomatoes.
That is truly a free Market enterprise. There is NO way we will ever return to that business in a big way, but it is refreshing to know these people who trade in the “old ways.”
And cucumbers with tomatoes make a great salad.
Anyone who invests their money in an unregulated crypto exchange based on an island in the Carribean deserves to lose his money. Anyone who sets up an unregulated crypto exchange on an island in the Carribean to escape regulatory oversight thereby facilitating theft deserves to go to jail for a long time. Justice has been served on the two accounts.
When crypto first came out it was not considered as a security. It was more akin to trading baseball cards. Even now you can’t call it a security. It’s no longer baseball cards but what is it now? It is not a currency nor a commodity. If a group of people put a value on something like stamps or whatever, and trade them within the group while posting the current price then you could say those stamps have real value when to the wider population they don’t. As long as the In group believes it then the stamps have value.
The modern day equivalent of the tulip mania.
This is the most uneducated post I’ve read here yet.
“This is the most uneducated post I’ve read here yet.”
Had a chuckle seeing someone downvote and comment on comparing a worthless digital trinket to tulip bulbs as “uneducated”.
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The SEC is the enforcement branch of the big banks.
They continually ignored complaints about HFT spoofing & market manipulation until Navinder Singh Sarao, who had repeatedly complained about it, created an algorithm to spoof them back.
Only then did they do something, and of course, they charged Sarao while doing nothing to the banks he was complaining about.
Don’t get me started on the “Madoff exemption”, a member of the SEC wrote a law to successfully protect his own Ponzi scheme.
The sole function of the SEC is to protect banks, which means protecting their prop desk profits from retail traders & small investors.
If you’re not wealthy & affluent, the SEC is here to regulate you.
If you are wealthy & affluent, feel free to lie, cheat & steal at will, the SEC will protect you from small traders & investors.
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Whether the Fed makes things better or worse is irrelevant to me. Because I cannot do anything about the Fed. I simply accept that it exists.
All I can do is observe what they are doing and how that affects my investments. Along with all the other things that affect my investments.
I continue to expect a slowing economy, which is partly due to the fed hikes over the last two years. Current conflicts around the world are not helping much either. As my stock holdings (primarily oil stocks) have been rising recently, I have been taking some profits and raising extra cash. (Just over 20% cash now.)
You can’t do anything about the FED ? WTF kind of defeatist attitude is that WE the people can and WILL get that parasite off our backs sooner or later
You are starting to remind me of the old man that lives in whorehouse in Rome in Joseph Heller’s “Catch 22”.
Thanks Doug. Light bulb moment.
I now understand why “Realist” chose that name.So appropriate. I saw him post something here a month or so ago. I hope he comes back on a regular basis, but he probably won’t.
Too many folks here are living in fantasyland, thinking they can influence the world by changing someone else’s opinion; including me!
Clearly I am wasting some of “my” precious time trying to get people to stop wasting their precious time on things they cannot change.
I also now understand why Realist doesn’t bother with comments now.
I will simply read the blog from now on to gather information that helps improve my situation.
You can expect fewer comments from me going forward as there is no point in wasting this much of my time. Clearly, I am not going to change anyone’s opinion.
Bye for now.
I am not criticizing you PapaDave. I just saw a similar outlook. In the novel the 107-year-old Italian man living in a whorehouse when talking to the 20-year-old pilot said you have to adjust to reality and not the opposite. You are not Italian by any chance?
Agree 100% PapaDave
If people took the time they waste bickering and fighting online and put it into activities that improve thier lives they, and the entire world, would be way better off……but here we are. We just continue to divide ourselves and get increasingly angry over things we have zero control over. It’s the equivalent of complaining about the weather IMHO.
In my view, accepting “what is” is sign of emotional stability. It signals that your are a conscious thinker instead of an unconscious emotionally driven chaotic mess.
You have ultimate control over how your feel and think about things in this world.
I highly recommend Harry Browne’s book “How I Found Freedom in an Unfree World”.
Well, you’ve change my opinions from time to time.
YOU are realist ….don t fool yourself !
Between the Civil War and The Fed we had,
The Panic of 1873.
The Depression of 1882.
The Panic of 1893.
The Panic of 1896.
The Panic of 1907
The Panic of 1910.
There were a respectable number of ordinary recessions in there as well. It wasn’t all peaches and cream before the Fed.
It definitely wasn’t. But those panics and recessions are a feature of Capitalism and free markets, not bugs.
They happen when capital has been misallocated for too long in unproductive assets. At these times distressed assets flow from weak hands to strong hands. It’s similar to what happens in Nature with the survival of the fittest.
Hey FED guy Whatever you say they are still parasites and ugly ones at that
We also were on the Gold Standard then.
Wouldn t you (we) have done great if only you (we) had bought gold somewhere when the US of A started its eternal war against ‘terrorism’ ? Personally I started buying a good ten years ago, with ups and downs I am now up a 100%, not about to take any profits yet though, not under the present circumstances ….
Between the Civil War and the Fed America became the manufacturing power house of the world. So what if there were a bunch of numerous small economic cycles along the way. Immediately after the Fed we had the boom bust cycle of the 1920s and 1930s. Way to go Fed. Nothing like central planning by a bunch of bozos to F things up.
“Between the Civil War and the Fed America became the manufacturing power house of the world.”
Manufacturing, transport, increasingly cultural etc… The US Western and industrial Expansions, may well have been the single most transformational 3-4 decades in all of humanity. The Chinese may squabble about that, but while China since Deng has seen a billion plus society through an absolutely massive transformation; the American experience of a century prior, completely transformed nearly the entire world.
“Between the Civil War and the Fed America became the manufacturing power house of the world.”
And not just manufacturing. The US Western and industrial expansions, may well have been the single most transformational 4 decades in all of human history.
The Chinese may squabble about that, but while China since Deng have absolutely massively transformed a billion plus society; The American experience of a century prior massively changed nearly the entire world.