The Truth About Free-Market Capitalism: Oil Prices Reveal Extent of Cronyism
By Daily Bell Staff - February 17, 2016

Loy wonders why we acquiesce in the appalling realities of global inequities and sleep so peacefully at night. He finds his answer in Rodney Dobell’s explanation that “lies largely in our embrace of a peculiarly European or Western [but now global] religion, an individualistic religion of economics and markets, which explains all of these outcomes as the inevitable results of an objective system in which … intervention is counterproductive.” Any intervention in the “world of business” is perceived as a threat to the “natural order of things,” a direct challenge to the “wisdom of the market.” He claims that: “The hegemony achieved by this particular intellectual construct … has become a dogma of almost universal application, the dominant religion of our time.” – Counterpunch

It is generally accepted in the mainstream media that the West runs on “capitalism” – that market forces determine sociopolitical and economic outcomes.

This view is prevalent in government and education as well. It permeates society at a fundamental level like muddy water seeping through a swamp.

The excerpt above from Counterpunch (a “leftist” element of the mainstream media) provides us with a strong statement of this elite promotion.

The essay, posted in May 2015, cites David R. Loy, a professor of international studies at Bunkyo University in Japan and a “Zen Buddhist teacher.” In his book, A Buddhist History of the West, we are told he offers “a compelling viewpoint on why we ought to understand our present economic system as the West’s dominant religion.”

It is one in which “intervention is non-productive.” Say what? Twenty-first century government is dominant around the world, including the West.

Central banks manipulate every part of the larger, global economy. What is not touched directly by governments is often entangled in the West’s military-industrial complex.

Our environments are pervasively shaped by huge institutional forces controlled by shadowy financial elements. But during this era of the Internet, these forces have been exposed: We can see them more clearly if we wish to.

A recent article in Forbes shows us the reality “behind the curtain.”

The following excerpt should certainly help dispel the idea that the West runs according to free-market dictates. It clearly sums up recent economic history and makes inarguable points regarding monetary influences and those who shape them.

Central Banks Sizing Up Oil Intervention? … We’ve argued that central banks should outright buy commodities (particularly oil). And we think they will.

In 2009, despite the evaporation of global demand, oil prices spiked from $32 to $73 in four months after China tapped its $3 trillion currency reserves to snap up cheap commodities. Within two years, oil was back above $100. China’s role in the commodity market was a huge contributor to the recovery in emerging markets from the depths of the global financial and economic crisis.

… We expect intervention to come … Remember, as we said last week, historical turning points for markets often come from some form of intervention (public or private policy). And both the ECB and the BOJ have said in recent weeks that there is “no limit” to what they can buy as part of their respective QE programs.

Oil prices have moved down with extraordinary vigor in the past months. Not so very long ago, prices flirted with $100 a barrel. Now there are suggestions oil might move through $20 a barrel and go as low as $15.

Of course, an argument can be made that the price of oil has now been manipulated downward much as it was manipulated upward in past decades via false scarcity promotions.

The idea is that low prices will destabilize the Russian economy in particular and make Russia more amenable to Western influences. Perhaps Putin will be ousted as part of this program, or so it is reportedly hoped.

At the same time, low oil prices have begun to affect the fabric of the larger market itself. The January sell-offs seemed to be preparing global markets for a scenario similar to the 2008 subprime crisis in which the world’s solvency was undermined by a real-estate collapse.

Large corporations and banks made investments and projections based on oil prices that have proven woefully optimistic. Thus this Forbes article arguing forcefully for intervention and explaining why it has taken place – with salutary results – in the past.

For investors, especially, central bank policies in the 21st century are of the utmost importance. Fall victim to the perception that market forces shape our world and you risk running your portfolio aground on the jagged shoals of terminal naiveté.

Upcoming months will surely help shape the immediate future of 2016 market performance. And the “shaping” will come in the form of central bank determinations and implementations.

Do you think the world economy is woefully over-extended? That capitalism’s current model is headed for extinction in the long- or short-term? Have you sold the market short based on rational expectations of the unwinding of a ruined system?

Perhaps you better think again. The world is run by a handful of people wielding extraordinarily powerful monetary, fiscal and industrial facilities.

Please note: This is not necessarily a grim truth and it certainly doesn’t interfere with your ability to seek out opportunities and capitalize them. But it does capsize – at least it should – any fairytale having to do with the impact of free-market forces on the Way the World Works.

In the long term, the market has its way. But in the long term, as Keynes once said, we are all dead. In the short term the market is highly manipulated, even though rhetoric doesn’t admit to the reality.

Not every manipulation has the requisite, expected result, of course. But these manipulations ought to be taken very seriously. They deserve to be scrutinized, assessed and acted on as necessary.

Conclusion: Don’t fall into the trap of rational expectations when it comes either to markets or the larger “capitalistic” system under which they are said to labor. Global markets have likely never been more controlled or manipulated than today, so be wary of investing in any asset class touched by the forces enumerated above.

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