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The International Writers Magazine: World Finance

The Long and the Short of it
Michael Levy

How can the world financial system allow a trillion dollars to be written-down or written off within the last few months? How can oil jump from less than $12 four years ago to $147 this summer and then fall down to $91 in a couple of weeks then back to $120 on 22 September falling again to $109 today 23rd? What kind of manipulation is this? To a lay person, it sounds like an economic war.

Let's take a scientific approach to answer the question. There is a cause and effect for every action on earth and in the universe.  Einstein's discovered; E=MC2; which relates to everything as energy. Energy can take many forms and guises but nothing is ever lost. It can turn gasses into mass and visa-versa. We humans were born out of stardust which, billions of years ago, swirled around the cosmos like Dancing Dervishes. The energy that created the sun, then earth, is still forming and reforming everything in the material world. Einstein also declared everything is relative in a space time zone and all is unified. However, that is disputed by other scientists who came up with a chaos theory where everything is random and things happen by chance.
In every walk of life you are always going to get opposite view points no matter how sound and effective the argument for or against. In fact, a distinguished debater can argue the case for both sides of a dispute and articulate each case in parallel terminology that will make sense to opposing parties. For instance, take the price of gold and how it is traded on the commodity markets and how it obtains its changing values.
Gold is a metal and every ounce that has been mined over thousands of years and is still around. The quantities keep increasing as the gold nuggets are dug out of the ground every day. It has an industrial use and a jewelry use. If these two components were the only way to value gold its price would be more stable and lower. However, it is also perceived to be a hedge against inflation and also a supposedly safe haven in a world of economic and political chaos. Both these two components depend on how well the intellectual propaganda machine operates its rhetoric on events played out on the world stage.
With the help of the media and hi-tech, information is fed to the public at warp speed. The trades are performed on mercantile exchanges. The contracts are margined so a small percentage of the monthly contract price is required to trade each contract of 100 ounces. The value can increase and decrease at a fast pace due to all types of leveraged derivatives and electronically traded funds known as ETFs.
On the other side of the value of gold it does not yield any monetary interest. Also, there is a charge when dealing on exchanges and if delivery is taken large quantities will be stored in a bank for security. When demand for the yellow metal drops it becomes a depreciating asset that is a liability because money has to be paid out to store it. Over the past 30 years the price has swung from $250 -- $1000. Today, the price is around $850 an ounce and rising because of the financial market turmoil. Since most people who trade commodities lose money it is a speculation only for people who enjoy gambling in a casino. When fear evaporates the price may fall twice as fast as it went up.
Oil and food commodities are different as they have an end use. Nevertheless, outrageous prices have been allowed to spiral out of control by a lack of regulation by people in power who believe in the myth of keeping alive a free market. When prices can be controlled by perceptions, ideas, thoughts and suggestions, then my friends, we are dwelling in the PITS of humanity and the markets are not free. They are held captive by topsy-turvy reason and logic that many self-interest experts can explain as factual. Supply and demand is paramount but figures can and do become distorted, thus supplying propaganda and fallacies with room to air.
Without getting too bogged down with the complexities of financial markets as they are a 62 trillion dollar market.  They are extremely complex these days and contain collateralized mortgage notes that are turning out to be of little value. These also depend on credit swaps, which is the rate banks lend each other money. The lower the ratings of a financial institution the higher interest it has to pay to stay in business. When credit rating agencies such as S&P and Moody's, downgrade them at a crucial and vulnerable time, they prematurely go into bankruptcy or taken over by the government as is the case in AIG, brought about mainly by the negative forces of short sellers.
If that were not enough, hedge funds that are unregulated have sprung up and they can short stocks at will. If they work in conjunction with each other, which is deemed to be illegal, they can bring down sound financial institutions in a matter of days if the company is having temporary liquidity problems. Even if everything is legitimate in the short selling, once it reaches a certain level mutual funds and the public become fearful and they sell the stocks they own.
The web of greed and fear becomes ever increasingly wound up in unregulated markets that resemble a Wild West shoot out, otherwise known as free market capitalism. The reverse is being projected when commodities or stocks reach overvalued levels. Both long and shorts are governed by erroneous thought process when extreme values are extended beyond normal expectations. This is what is going on in a nutshell but of course it is much more intricate as the devil ego/intellect is in the details.

* Understand, very few values are what they seem to be in a financial world controlled by minds that cannot distinguish truth from opinions.
* Therefore, truth cannot be found in intellectual opinions that are slanted in intellectual reason and logic on the left or right, the high or the low, the long or the short.
* Truth cannot be manipulated but intellectual perceptions can.
* Truth cannot be stretched but intellectual fabrications can.
* Truth cannot be exploited but intellectual propaganda can.
* Truth cannot deceive but intellectual deceptions can.
Truth is the intelligent energy that created and evolved the universe. It is inherent in every human being, filtering in and out of every cell and particle. It is unified energy that flows throughout the cosmos. The only place in the construction of a human being, where unified energy is distorted into chaotic random energy, is in the conscious department of the brain.
The distortion of unity is transposed into random acts of destruction and negativity by the creation of an illusionary ego/intellect/personality, that believes in its own power base, outside the realms of intelligent energy; E=MC2;  The symbol for human destructive anti-matter should be D2M= NE…Darkness squared with mass = negative energy. Unfortunately, I do not have the ability to work it out with mathematic equations.
As Einstein stated, E=MC2; everything is relative to a time space mode. On the one hand there is unified energy which is fueled by the speed of light. It creates harmony and grace. In human terms, it conveys compassion and kindness. It allows brilliant minds to discover and invent all kinds of material goodies for the benefit and well-being of all humanity...All is good when the human intellect serves its intelligent energy in philanthropic manners.
However, when the human being uses negative energy; D2M= NE, to the detriment of everyone else, it divides itself off into the anti-matter of differing belief systems, that cause the effect of chaos and mayhem.
Since wisdom is in short supply and demand for, more than enough, is prominent in society throughout all its divisible outlets, disorder and turmoil will continue on a not so merry path for everyone who subscribes to their own personal belief system, beyond the realms of intelligent truthful energy. In economic terms, prices will be driven higher and lower than truthful fundamentals dictate, which is not much fun, but is extremely mental.
In the immortal words of Robert Frost ... “Forgive, O Lord, my little jokes on Thee
And I'll forgive Thy great big one on me”

Michael Levy is the author of the book "Invest With a Genius"

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