In this series we’ll take a good look at the background underpinning markets: opponent modeling, psychopathology, probabilities and risk transfers. All the things that do not matter in the REAL WORLD where we (hopefully) have a caring family, friends who love & respect each other.
Some of this heavy stuff will be presented as lightweight stories.
PART I - A Personality Profile
Let’s Pull A Fast One
When I first met Yosef, a professional gambler, I was skeptical. A phd in physics and highly intelligent he explained to me that he suspected there was something wrong with the casinos he was in. He spoke in a soft sing-sang and carefully tested the waters. I was the mark he was working, no doubt. He was trying to convince me that winning against the house was not only possible, but actually easy!
After standing his shittest and declaring quite frankly I thought he was nuts he smiled softly (he had heard that before) and invited me to his home. We entered a tiny appartment stuffed with 20 machines on shelves up to the ceiling. All running online casino apps automated with autohotkey, a scripting engine. It was his friends appartment and telefone line, opsec ok. I learned that the roulette wheels turning and fans buzzing didn’t cost him any money.
Only later I realized that he was in the business of spending other people’s money and energy. He was spinning the wheels collecting series of numbers, hundreds of thousands of numbers. Day and night. I was wondering how he could sleep with all that noise.
“Look, do you see this?” He showed me a Microsoft Excel sheet. Inmidst of all the random series… zeros. Too many zeros. “Oh, that’s what they call the house edge” I was thinking. A casino merely redistributes funds between winners and loosers, with some going to the house. The house edge is normally a small percentage, but with this online casino it was BIG. So in reality hustlers are not only playing against each other - what’s called competition in markets - but AGAINST THE HOUSE.
He got me. I had designed pseudo random number generators, but this one was bold: 4 zeros in a row? They must have tempered with the code, they were cheating! I felt a strange mix of righteous indignation and exitement. He told me we could pull a fast one on this shitstore and all the money we could make. All I had to do was to invest my time and write some code. That would be my initial (small) investment. Moreover, he was the only person who understood my own project - a phd in pattern recognition. It all added up perfectly.
At home I felt confused. Yosef tricked “friends” into lending him money which he gambled away. He promised to make them more - the old “investment” storyline capitalizing on his reputable looks and his phd. It amused him to put something over on his victims and their speechlessnes and shame was his triumph when he smugly revealed “this time it didn’t work out”. He was an imposter. Why did he live a life of deception? A quick calculation revealed that exploiting the non-random distribution would take a long time at the big wheel and a significant bankroll as safety margin. It would be a waste of time.
Nevertheless I designed my first casino algorithm. It played at a 14 number kiddy wheel - and won. It played on zeros and increased set amounts moderately by a factor of 1.2 if it lost, otherwise pocket the gains. The casino’s random number generator was so poorly designed that it was easy.
I could reinvest my gains and - uh - that would lead to exponential profits, even when starting small. This is the edge every professional gambler is after, a persistant chance on average greater than 50%. The bums at the slot machines are looking for that edge exactly as “sophisticated investors” in the global derivatives casino.
Proudly I presented my work. But Yosef was unhappy. “Beginner’s luck! Pure chance!” He told me off. He refused to play at “kiddy tables”. With slowly increasing gains my bot pocketed, he got more and more grumpy. I realized if I wanted to use his accounts for further experiments I’d better loose quickly or risk our special “friendship”. He was not happy with the win-win situation I was offering. He was into putting others down.
We split. After two weaks (sic! “weak weeks”) I set up an account of my own. It didn’t turn out too well. My bot failed to emulate human behaviour and played too dumb a strategy to fly under the radar. After only 5 mins a window popped up. “Can I HELP you?” I almost fell off the chair, this had never happened at Yosef’s place. Being watched like this was not was I expected, nor could my bot handle it. This account was burned.
Quite shocked I swore to myself never to enter a casino again. EVER. It turned out that Yosef was not under observation. In 2 years he had played every day and lost money on average. A regular customer. I needed his account to improve my skills.
Another 2 weeks later the telefone rang. Yosef acted as if we had never talked about gambling or anything. Then he said out of the blue: “You know, I have a son, also a phd in physics. He plays poker. Can you do a poker bot?” -
PART II - Financial Risk Transfer
The Big Pot: Exit Scams, Bust-outs And Monetary “Reforms”
Bankruptcy Fraud is defined as: :
States are debtors. But who are the creditors of states? Well, you and me (bonds and taxes, many small amounts, future generations pledged as collateral) and some realy big players. It is these big players who dictate to the state on how to restructure things to bring in their loans plus interest.
So, what happens when a state declares bankruptcy? As always, creditors line up. You guessed it, mom and pop are last. Moreover the people are made to compensate the big players in the future as part of the insolvency procedure. The people loose twice: first bonds (which are loans to the state) are declared worthless, stocks are treated as collateral for derivatives gamblers — that is mom, pop and other adversaries get nothing. Second there will be a special tax in the future, i.e. in the form of mandatory mortgages, to refund big creditors.
If you think “well, that happens to shithole countries, but never to the US” you are, in fact, correct. Central banks form a hierarchy and on top of the pyramid resides the Dallor as global reserve currency. The Dallor may not fail — or we are fucked. Rest assured the 800 military bases will protect it, to keep competitors in check and discipline debtors as needed.
The US govt feels little pressure to pay back any debt, because it’s bonds are in high demand wordwide as collateral for smaller central banks further down the pyramide. That is, the US govt can roll over old bonds and issue new ones. A shithole country does not have this option. [1]
Not all debts are created equal: some have interest rates below inflation and payback may not be enforced. These are net winners. Others are net loosers. As in every casino money is shifted from loosers to winners with some going to the house.
Seniorage: the real inflation of the US Dallor is always HIGHER than the average yield on US govt bonds. That’s a nice EDGE the US enjoys in this global casino. Any country who wants to leave the casino will face consequences. Most countries can not pay back its govt debt anyway. [2]
The lower in the financial pyramide the higher the pressure to pay back debt. This comes natural because shithole countries carry higher risks for creditors.
So, where is the FRAUD in all this?
Monetary reforms happen regularily around the world, but are not talked much about in history books. However, legal procedures are in place indicating that the day of the great reset is pre-planed in every fiat system we know of. It’s called EXIT SCAM in crypto. In fiat terms it’s called redenomination.
Technically the monetary system as a whole is designed in such a way, that it is bancrupt by default: in the global balance sheet the sum of debits is always GREATER than the sum of credits. Thats because interest on positive balances is less than interest on negative balances on average. In other words, positives and negatives don’t cancel each other out — it is impossible to pay back all debt (AT ONCE).
Practically this is NOT a problem when the speed of circulation is right and the economy grows AND we’d want to continue ad infenitum with this non-sense. That is not the point, although the result is a game of musical chairs (defaults built-in). The FRAUD is in the concealment of information from small creditors — mom and pop, you and me.
Money inevitably flows from the bottom of the pyramid to the top. That’s a design choice not the fault of “lazy” populations. By lying by omission small creditors can not make informed decisions about the risk they are taking when participating in the credit arrangement called “tax payments”. That IS FRAUD. Risk is transferred to people who are kept in the dark about the very fact that they are pledged as collateral for a very corrupt system.
So in sum, the public is called upon to bail out players who are too big to fail — that is the hypothesis that is is better to continue a totally corrupt system than to let it fail.
It is no coincident that the following headline from The Times on 2009-01-09 is quoted in the genesis block of a well known project:
Bailouts mean “Moral Hazard” in financial terms. That is the EXPECTATION OF BEING BAILED OUT is factored in by big players engaged in risky bets in the global derivatives casino — this is financial risk transfer to the general public and it transforms to that edge big players have in the game.
State bankruptcies are unavoidable from time to time, as states play a game of musical chairs and the public will pay up — that is financial risk transfer, too. Private owners of central banks a guaranteed the HOUSE EDGE.
It’s a CON GAME and you don’t learn at school how it works. And that’s lying by ommision because you HAVE A RIGHT TO BE INFORMED. After all you will pay up.
DO YOU?
[1] Problems arise when the wordwide demand for US bonds decreases. China became a net SELLER of US bonds. A similar dynamic arisis in corporate bonds, when the issuer is too big to fail.
[2] which is a precondition to sovereignty, of course. Do not even dream of debt forgiveness.