Are All Financial Markets Distorted Ponzi Schemes?

I read where George Soros, not exactly a hero of mine, say an intelligent thing about the markets. He said all markets are distorted. He said that no markets accurately reflect reality! Soros got a lot of flack from the comments at Business Insider for pointing this truth out. Seems to me that when someone says something that is accurate, we ought to listen, even if we don't trust the guy ultimately.

So, I have a few questions and comments about various markets here to see if I can figure out what is manipulated:

Gold: When markets are in turmoil and decline, gold must be sold in order for people who have positions in the metal to meet margin calls. If the metal was money, why couldn't it be just cashed in as money to meet margin calls? Also, margin calls in gold in decline are a real drag on prices. This seems to imply that gold is a victim of too much easy money paper. When easy money takes over the universe you have a bubble. Maybe it is different this time, or maybe it isn't. Last crash, in 2008, gold was hit as people covered margins and fled to US treasury bonds. Gold is scarce, and that works in it's favor. But if the stock market crashes it will likely decline. If there is a depression, the dollar will be king, at least for the foreseeable future.

Stocks: Bernanke came out and said QE drives up the stock market. With a bunch of easy money chasing stocks, their value is distorted and the stock market could be a bubble. Usually, when there is too much easy money the value of things are not accurate. QE in and of itself is not evil, except in excess. But it should be used for lending, not for buying stocks and assets and falsely driving them up.

Real Estate: Here is the mother of all paper-getting-in-the-way-of-true-value in the way it affects real estate. Real estate should be an investment that is not liquid. While the other markets allow margined people to get out quickly, real estate does not, unless it is in the white hot heat of a bubble. In a bubble, real estate is almost as liquid as money. People can do deals and flip and go crazy. Real estate is not supposed to act that way, so you can tell you are in a major bubble when behavior that takes place.

Bonds: Treasury bonds are a counterbalance, because they are more valuable the more fearful people get. So I guess if all the other markets tumble people will pile into bonds, and not gold. I think that has a lot to do with the reserve status of a currency and of military power and stability, although those are not always working together. Of course bond yields are horrible, and the regular investor on the street suffers from low yield, if they need the income. Some say that US treasuries, the safest investment on the planet, could be pricing in too little risk. While that is possible, and it likely is a bubble, the rest of the world in comparison is a pretty risky place. Treasury bonds have a ponzi quality however, as so much of the purchases are from the central banks in the world, including from the private US Federal Reserve Bank.

Other markets other than real estate are always liquid, so that it is difficult to see when there is a bubble. But the tell tale sign is a massive amount of easy money leverage in the system. QE helps this bubble grow. QE is definitely a bubble blower, and commodities are one of the main spaces for that speculation.

So, it is my view that you have the right to walk away from all these speculative bubbles. You can sell stocks and get out if you think there is a bubble. You can sell gold and get out if there is a bubble. But you cannot always sell a house if that is in the neighborhood where your kids go to school, etc. It is my view that walking away from an underwater mortgage after a crash thus becomes a moral act. You have the right to walk away from a proven easy money speculative ponzi even if a central bank allows it.

So that brings me to discussing the views of many who are on many bulletin boards, commenting their little hearts out. So many seem to swoop down from God knows where, pontificating about the immorality of walking away from an easy money scam. Some get encouragement from Megan McArdle, editor of the Atlantic, and other mainstream pundits. Many get inspiration from Rick Santelli.

Some are just Tea Party members trying to understand the morality of their own badly informed consciences. Certainly, if your conscience bothers you then don't walk away!

But I am giving you permission to walk away because I am explaining to you that you have been had; [always check with an attorney for the legal ramifications of walking away]. You have been conned by massive false demand brought on by easy money that bloated the value of your house, forcing it to crash massively in value.

And perhaps some who pushed the prices up decided to help the crash although there are people who understand that better than I do. Regardless, the easy money itself distorted the market, just like Soros said. Who allows easy credit along with a growth in the money supply? None other than your favorite neighborhood central banker, that's who! No one is more responsible for bubbles than central bankers. No one!

As Will Rogers once said, bankers allow speculation and bankers make money through greed. Makes you wonder how much greed is driving the gold market and bonds and stocks, and yes, maybe real estate again down the road. Mainstreet is pretty much out of the game. They are listening to the logic of Soros in their own minds, a common sense understanding.

I would like to see easy money speculation banned with regard to oil, food and housing. We just can't afford it as a society. The tax of speculation is just too great all over the world, with this rampant churning of contracts that no one ever turns into a real commodity.

If anyone wants to comment on their view of gold as a bubble, stocks as a bubble, or bonds as a bubble, then feel free to comment. We already know that real estate was a bubble. If you don't think some speculation should be banned why not share the reasons why?

This article is not about giving financial advice. I just want to point out that markets are distorted, and that means they are not free and accurate in reflecting reality. This is an important warning to main street to be careful out there.