About 57 years ago, Friedrich von Hayek wrote The Road to Serfdom, a masterpiece of economic literature, 320 pages of brilliant proof that when a government starts down the road of central planning, then the citizens, excuse my French, are screwed.

Here's the quote I would ask you to memorize, because another 10 years from now, or even 5, we're going to look back and say, what the hell did we do in the first 10 years of this decade?

The more the state plans, the more difficult planning becomes for the individual.

That's from chapter six. Read it again, please. Really.

If you haven't read the book, or at least read an excellent summary of the book like the one you'll find here, then you're missing out on the greatest argument against the wholesale destruction of your right to do stuff the way you want that has been happening right in front of you and me for the last 10 years on an unprecedented scale.

And why would you care? 

Fifteen years ago it wasn't practical, or nearly even possible, for you or I to trade currency, to operate in the foreign exchange market, at all. Next to impossible. It wasn't available to you. But technology opened up a corridor that no one had been able to open before (electronic trading) and once opened, hundreds of thousands of us decided that's what we wanted to do.

In another 10 years, if we continue heading in the direction we are now, you might not be able to trade currency at all, again. Wouldn't that be ridiculous? Well, we're going down that road, and it's my livelihood, and if you're reading this, it's probably yours, too.

I'm not saying that all traders were profitable. 95% of us did it poorly, and lost everything that we put into it. Really. It's true. You know it, right? Most people lose money trading, and they don't just lose small and call it a day. They trade like drunken monkeys. They lose about $5,000 on average, and they do it in about 90 days, and then they usually quit. The valiant (deranged) souls buy another stack of chips. They lose that stake, too, and by that time there are about 10% of the original group left. Then that group gets thinned out in the same way until you have a very small, very dedicated, and very lucky group of people who are making their living in the currency markets.

This is not much different than:

Investment banking (where most people fail)
Investing in stocks, wheat, or pork bellies (where most people fail hard)
Running an investment bank (where assholes blow up companies all the time)
Starting a new small company (where most people fail, cry, and then go back to a desk job)
Starting a hedge fund (most funds do not beat the market = FAIL)

...Or any other capitalist venture. Except for one thing. There is one path that typically leads to repeated success. Guess what it is?

Politics. You get elected to office, and then guess what? You're likely to get re-elected over and over and over again, because once you have the power, you can hand out the favors, and then you can raise lots of money, and get elected again, and do more favors. We should all be so lucky to be central planners in the great machine of democracy.

Are you lucky that the government wants to protect you from things that are bad from you? Or should you be worried that someone has decided for you what's good and bad? I'm not talking about social issues, like abortion or pornography or teenage drinking. I'm talking about economics. When the government tells you that:

THIS risky venture is acceptable

 BUT

This risky venture is NOT acceptable

What is the purpose? Fail rates are high in almost every capitalist venture you can think of. Period. People are terrible at getting things off the ground. Most people assume they are going to be more successful than they really are. Most of the "winners" in any capitalist venture brought some combination of skill, luck, persistence, and excellent timing to the table. But guess what? It's evolution! It's the way you and I can even walk upright today, or we can think with a neo-cortex, or how you have a thumb. We might be really mad at AIG, or Lehman, or the jerkwads at Bear, Stearns, but that's how capitalism "works." People take risk. Even dumb people do. Wealth is created and destroyed, and you cannot plan your way to avoid problems.

Would you outlaw the laws of nature because they are unfair? Would you like to bring back the dinosaurs, and get eaten?

When you are told that you cannot open a financial account offshore, or that your money does not travel freely where you need or want it to go, the central planners are putting the brakes on risk-taking. What's next? Futures trading? Stock trading? What, I might ask, is an acceptable form of risk taking that the government can live with? 

I am exhausted by arguments that forex dealers somehow present a greater risk to investors than the investors themselves. I receive at least 1,000 emails per year from people who believe that the reason they lost money trading currency was because the dealer purposefully stopped them out. 

Somehow the government caught this argument and ran with it, but the entire U.S. governmental regulatory machine somehow missed every other financial disaster of the last ten years. 

We will protect you by not allowing you to open a bank account!
We will protect you by not allowing you to freely exchange currencies for each other!
We will protect you by lowering the amount of risk that you are able to take!

And in the midst of all of this, there are no new regulations on forex leverage for banks, for hedge funds, or for "sophisticated investors." Let me name some of these "sophisticated investors":

Long-Term Capital Management
Lehman Brothers
Bear Stearns
AIG

Why do these people regulate you like they do? Why do they do this? Why bother with Joe from Topeka and his $5,000 trading account, when there is so much stupidity going on with massive firms that can destroy so much more wealth, so much more quickly?

They do it because they are regulators. They are paid to go to work, and find things to regulate. So that's what they do. They draft rules. It doesn't have to have a purpose or a reason other than that.

When the state engages in central planning, it begins to do that planning for its own sake. 

I'm just saying. That's all. 

I promise that after I finish writing this, I'll be done ranting and I'll get back to trading.

IMPORTANT UPDATE: Click here for information on the next webinar series about the CFTC regulations.

On the greatest questions of our time, the government seems to keep getting the answers wrong. At least it seems that way, doesn't it? Doesn't it appear that the government makes a whole lot of decisions based on erroneous, or incomplete, or outright false information? Consider the following:

The CFTC desires to "protect" you from losing money to what they almost resort to calling "bucket shops." They require U.S. retail forex dealers to disclose profitability of customer accounts, but don't require the same information from futures brokers, as if retail futures traders are any more profitable, or any less gullible, or any less informed, than any other kind of retail trader on the planet.

Or they restrict access to opening foreign forex accounts because foreign governments do not provide the same protections as U.S. regulators.

Let's recall what a grand job the U.S. did at regulating:

Enron (volcanic fail)
Long Term Capital Management (funny if it were not so sad fail)
Worldcom (epic fail)
Bernie Madoff (bloody fail)

Just to name four enormous failures to protect the public when there were laws already on the books that were supposed to protect us. The laws did nothing. The laws prevented none of the above behavior from happening. The laws did not protect, or restore the financial well-being, of hundreds of thousands of innocent Americans. Why? No one asks, and no one cares to ask anymore. We're just hurtling towards our next grand explosion of wealth, which should be coming within the next 2-5 years (right on schedule). 

The CFTC wrote to me two days ago and said the following:

“Entities that offer off-exchange retail forex products but are not eligible counterparties will be subject to investigation and will be prosecuted for conduct that violates the CEA.  The Commission has a long standing tradition of international enforcement and coordination with international regulatory authorities in furtherance of the investigation and prosecution of illegal activity.”

And:

“In any filed enforcement action the Commission and Courts consider, on a case by case basis, a range of remedies including, where appropriate, civil monetary penalties, trading bans, registration restrictions, restitution and disgorgement and any other appropriate remedial relief.”

This all comes from an official CFTC spokesperson. This means that if a foreign retail forex dealer allows you to open a trading account, the CFTC intends to sue that firm, and disgorge (their word) money from that firm.

What if the firm is based in Cyprus? Is the CFTC going to team up with the Cyprus regulatory authorities and shut down a retail forex company that pays millions of dollars into the Cyprus economy? You know what that firm is going to say? Eat me. That's what they are going to say. 

Does that mean I think that you should open an account in Cyprus? Hell, no! I don't know what the crap they're up to over there. But the point is that the regulations leave thousands of people in the same position they were before: no more protected. No better off. And meanwhile, those of us who agree to deal with the lower leverage, the strange trading restrictions, are we completely assured that the CFTC can protect us from an evil retail forex executive? No. They really can't. So why have the restriction on offshore accounts in the first place?

Please. Do you really believe that if a retail forex dealer in the U.S. wanted to cheat you, they couldn't get around regulations, restrictions, reporting requirements?