How Much is Enough?
A quarter point rate cut this week won't do anything to bail this market out. It's not just at the Fed has dropped rates and the market has continue to tank. No, the larger problem is the IMF says that there is a good chance of a dangerous fall in the dollar. What doesn't make sense is why the Fed would lower rates when there is such a calamitous event nearly at hand - not on my say so, but the IMF's!
The problem facing the Fed this week is that everybody on earth, from teenage speculators to grandparents knows that at least a quarter point drop is coming. Even with that on the horizon, the market's performance has been something you might be liken to a huge sucking noise. So what can the Fed do? Well, the price of gold moved up $4 last Friday. And, if you believe the "Fedism" that gold is not really money, it's just another commodity (and forget all those kind things that Alan Greenspan wrote about gold in his younger years!) the move is nothing more than a blip. On the other hand, the Gold Anti-trust lawsuit keeps moving ahead and GATA (see www.gata.org ) seems to be making some headway against rather powerful forces that would just as soon everyone work harder for less.
As I've written before, we are at the end of the economic long wave, and although this one was stretched out more than 70 years, when it really should have ended in 1987, the continuation costs are starting to show. Among them: the manipulation of gold prices as alleged in the Reginald Howe lawsuit, the continuing unconstitutional imprisonment of economist Martin Armstrong, the running of our printing presses so Russian can have a currency worth holding for more than a few minutes, the deliberate statistical distortions of the government's economic and employment statistics, and of course, the ongoing intervention in the markets by the Plunge Protection Team. Excuse me...I mean the President's Special Committee on Markets.
If you haven't visited Steve Williams site, (click here), you might really enjoy it. Not so much because his work parallels mine, but because it's a good read in its own right. If you're still living with "head buried in the sand" about the markets, here's some research that Steve has graciously allowed me to share from his work that was posted to the Long Wave Econ group last week::
Michael said: "George, et al: Has there ever been any documentation of the Federal Government (PPT) using taxpayer dollars to make purchases (sales) in the financial markets, and if so, how is it done? Thanks, Michael Spencer"
My reply...
Actually, the real name of the PPT is called "The President's Working Group in Financial Markets". This organization is documented and it includes US President, Secty of the Treasury, Presidents of each major stock & financial exchanges, Fed Chairman, Presidents of CFTC and SEC, and a handful of non-voting associates. The origination of controversy around government involvement in manipulating stock markets began when an op-ed piece appeared in the Wall Street Journal on October 27, 1989 by then Fed Chairman Robert Heller. The following is a link to a copy from library microfiche of that article (sorry for the poor quality):
geocities.com
The President's Working Group is not charted to make any "direct" trades affecting equity or financial markets. However, it really does not matter who is actually doing it, as long as the manipulation is effective. Since 1997 there have been very close ties between the major brokerage houses and members of the Working Group. In October, 1997's mini-crash it was rumored to be Goldman-Sachs and Merrill-Lynch on the trading floor of S&P futures that forced the bid to rise by almost $30 in a matter of a few minutes. Arbitrageurs took over and effectively inched the equity markets higher while trading the various spreads between indexes (baskets of individual stocks) and futures. I have also been told that it was Merrill that was instrumental in the first big "experiment" in 1987 by buying MMI (Major Market Index) futures that effectively stopped that crash from going any lower.
With this scheme, no tax dollars are used to manipulate markets. The 1997 manipulation appeared to be rather obvious, particularly when looking at the real-time sequence of events that coincided at nearly the same time of the morning... 12 blue chip companies announced major stock buy-back programs of which IBM announced a buy-back of $10 billion (even though they already had a $4 billion program already in progress) and there is insufficient evidence to substantiate that IBM bought back even $1 dollar of the $10 billion. Since 1997 there have been several instances that left behind scant evidence of manipulation, but not enough to point the finger at any one individual or organization. They have apparently learned to be more and more transparent in their activities. The reason Goldman & Merrill are active participants in these schemes is simple... they have access to huge managed accounts where they can place (ie: hide) trades. Collectively across all collutive accounts, the effect is substantial. I am guessing that if you were to review the raw SEC archives of individual trade data the trades would appear to have been made by individual accounts in varying sizes rather than one organization. Once they start the ball rolling and momentum takes over, they can sell back their positions to close out and effectively capture a nice profit. Anyone privy to these events can certainly profit individually in what must certainly be the most effective insider trading opportunity that is likely to ever exist -- since the CFTC and SEC are involved, it is unlikely that anyone would ever be penalized for front-running the manipulation activity. As for other alleged government manipulation, check into the discussions offered by GATA on the price of Gold. I have to admit that the arguments that the GATA boys are putting together are rather compelling.
-Steve Williams CyclePro Outlook geocities.com
A few years back, I asked the question in the title of a paper I had written on the very existence of the Long Wave in Economics. The question is simply this: As what point does empirical evidence become sufficient proof?
With the Fed meeting tomorrow, there are only two possible outcomes. One is a 25 basis point (BP) move. If that happens, the markets which should be flat today will continue the long slippery slide. But, if the Fed does a 50 BP move, the markets should rally for a week or so. The downside, of course, is what Ehor and I have been warning with the Debtberg work: When a country goes down the "free money" road, it locks the country into a cantagious outcome that is all bad. We have only to look at the Japan Nikkei, which as the markets close last night was less than 300 points from a breakdown at the 11,000 level.
Still, the world being "too big to fail", and warnings of the IMF notwithstanding, I'm already sketching out ideas for next week's report which I think I'll call "Welcome to the Brave new World of Free Money!". I think desperate people do desperate things...and a 50 BP cut would be just the kind of panic I expect from the Fed. Gasoline on the fire, to be sure, but when you only have a printing press and spin doctors to use, what's a poor Fed going to do???
urbansurvival.com |
