Nick Chase, The Contrarian's View, April 28, 1998:
But a crash does not mean a straight line to hell. I've been very puzzled as to why the Federal Reserve has allowed this mania to get so out of hand.... until I concluded that the Fed probably thinks it has the ability to prop up the market by manipulating futures, as it belatedly did in 1987 and successfully did last October (in my opinion). Thus, the Fed can (it thinks) keep stock prices afloat until the economy catches up, allowing it to manipulate money according to the health of the economy and ignore the financial bubble.
Well, that remains to be seen; but it is a recipe for the greenhorns to lose a lot of money before the bear market even gets underway.
John Crudele, New York Post, October 1997:
We also know that in 1989 former Federal Reserve governor Robert Heller proposed precisely what should be done in the event of another market collapse. Heller, who left the Fed just months before making his thoughts known, suggested rigging the markets through the massive purchase of stock index futures contracts.
"Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole," wrote Heller in an op-ed piece in the Oct. 27, 1989 Wall Street Journal.
These derivatives can be purchased cheaply and they tend to pull up the cash market on Wall Street along with them. |
