We just celebrated the Juneteenth holiday, when stock and bonds markets were closed. Indeed, June is usually a quiet month for U.S. financial markets, with stock trading volumes tapering off as summer nears.

Today, let’s take a step back from the daily ups-and-downs of the markets to examine a “big picture” topic: conspiracy theories about the financial world.

Conspiracy theories abound, most of them patently absurd. Many of these theories are disseminated through various media by America’s foreign adversaries, to undermine our society. That notion seems like a conspiracy theory in itself, but it happens to be true and well-documented.

Baseless lies about conspiracies have infected the bloodstream of our public discourse, like a virus. It’s not just politics. The investment realm is prey to conspiracy mongering as well. From whispers about manipulated inflation rates to grand narratives involving secret societies pulling the strings behind financial markets, these theories captivate the gullible and lead to bad investment decisions.

Below, I delve into some of the most popular financial-related conspiracy theories, why they are ridiculous, and how they can harm investors.

1. The Government Is Manipulating Economic Data

One of the most enduring conspiracy theories is the belief that governments manipulate data concerning gross domestic product (GDP), inflation, and employment to present a rosier economic picture. Proponents argue that inflation and unemployment are much higher than reported, and GDP growth much lower, suggesting that official figures are doctored to maintain public confidence, garner votes, and suppress social unrest.

Why It’s Ridiculous: GDP, inflation and employment gauges involve a range of data sets, with rigorous methodologies in place. While no measure is perfect, data manipulation on a massive scale would require collusion among numerous independent entities, statisticians and academics, which is highly improbable.

These statistical reports are scrutinized by economists and analysts globally, making any significant falsification extremely difficult to hide.

The people currently telling us that the strong U.S. economy is really in ruins are the same people who told us to fight COVID by drinking bleach.

Impact on Investors: Believing in this theory might lead investors to overreact to perceived recession, inflation and unemployment threats, potentially resulting in poor investment decisions such as hoarding commodities or abandoning the stock market altogether, which can be detrimental to long-term portfolio growth.

2. The Federal Reserve’s Secret Agenda

Another popular theory posits that the Federal Reserve operates with a hidden agenda, manipulating interest rates and monetary policy to benefit a select few at the expense of the general public. Some even go as far as to claim that the Fed is controlled by a shadowy cabal of elites (see item number five, below).

Why It’s Ridiculous: The Fed operates with a mandate to manage inflation, maximize employment, and stabilize the financial system. The central bank’s actions are subject to extensive oversight and transparency, with detailed reports and minutes of meetings made public. While the Fed’s decisions can be controversial and are often debated, the idea of a secret agenda lacks evidence and is inconsistent with the accountability mechanisms in place.

Impact on Investors: Fear of a manipulative Federal Reserve or international cabal of bankers might drive investors to avoid traditional investment avenues or make rash decisions based on unfounded fears, undermining their financial stability and growth. It can make them susceptible to financial scams perpetrated by the apocalyptic doomsters who also tell us that the U.S. dollar will soon crash and China will take over the world.

3. The Stock Market Is Rigged

A widespread belief among conspiracy theorists is that the stock market is rigged by insiders to exploit everyday investors. This theory suggests that a handful of powerful individuals or institutions manipulate market movements to their advantage, leaving regular investors at a disadvantage.

Why It’s Ridiculous: While insider trading and market manipulation do occur and are serious offenses, regulatory bodies like the Securities and Exchange Commission (SEC) actively combat these practices.

To be sure, well-positioned insiders can tip the scales in their favor, as long as they stay within legal guardrails. But the sheer size and complexity of the stock market make systematic manipulation by a few individuals highly unlikely.

Market dynamics are influenced by a myriad of factors, including economic data, algorithms, corporate performance, and geopolitical events, making it impossible for a small group to consistently control outcomes.

Impact on Investors: Believing the market is rigged can lead to mistrust and disengagement from investing altogether. This can prevent individuals from participating in the wealth-building opportunities the stock market offers, particularly over the long term.

4. Gold Is the Only Safe Haven

Gold bugs, as they are often called, firmly believe that the collapse of fiat currencies is imminent and that gold is the only true safe haven. This theory often includes the idea that central banks and governments are suppressing gold prices to prevent the public from abandoning traditional currencies.

Why It’s Ridiculous: Gold, while a valuable asset, is not immune to market fluctuations and does not provide the steady returns that diversified investments can offer. The theory overlooks the fact that gold prices are influenced by a complex interplay of factors, including supply and demand, investor sentiment, and macroeconomic conditions.

The notion of governments suppressing gold prices lacks credible evidence and does not account for the transparency and oversight in gold markets.

Impact on Investors: Over-reliance on gold can result in an under-diversified portfolio, exposing investors to significant risk. By focusing too heavily on gold, investors might miss out on more lucrative opportunities in equities, bonds, and other asset classes, thereby limiting their potential returns.

5. The Global Economy Is Controlled by an Evil Cabal

Perhaps the grandest of all economic conspiracy theories is the idea that a global elite, often described as the Illuminati or New World Order, controls the world economy. This theory suggests that major economic decisions are orchestrated by a secret group to maintain their power and wealth.

It’s reminiscent of the propaganda spread by Nazi leaders that the Jewish-owned Bank of Rothschild controlled the world and caused wars, which in turn mirrors the contemporary notion that the Jewish philanthropist and billionaire George Soros currently bankrolls left-wing subversives. (The Hungarian Soros, by the way, is a Holocaust survivor.) The global elite theory is usually tinged with antisemitism, a “blood libel” that goes back centuries.

Why It’s Ridiculous: It’s true that the chasm between rich and poor has gotten much wider in recent years and the billionaire class wields disproportionate political clout. However, the global economy is an incredibly complex system driven by the actions and decisions of billions of individuals, businesses, and governments. And as recent news events attest, today’s billionaire celebrity can easily become tomorrow’s bankrupt laughingstock (or felon).

The idea that a single group could control such a vast and dynamic system is not only implausible but also lacks any substantive evidence. Economic policies and outcomes are the result of myriad competing interests and influences, making centralized control impossible.

Impact on Investors: Belief in such a theory can foster a sense of helplessness and pessimism, leading investors to make defensive or overly conservative choices. This mindset can prevent them from capitalizing on growth opportunities and achieving their financial goals.

Economic conspiracy theories, while often captivating and sensational, are based on misinformation and a fundamental misunderstanding of how the economy and financial markets operate.

For investors, these theories can be particularly dangerous, leading to poor decision-making and sub-optimal investment strategies.

Do real conspiracies exist? Of course. But the aforementioned crackpot notions give legitimate conspiracy theories a bad name. From Jewish Space Lasers to “The Deep State,” these paranoid ideas represent the weaponization of ignorance.

As an investor, you need to maintain a critical mindset, rely on credible sources of information, and master the difficult art of thinking for yourself. Want to make money? Start by putting away the tin foil hats.

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John Persinos is the editorial director of Investing Daily.

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