A recent message about Controllers on Wall Street and unusual stock market activity evoked a flood of replies that are worth sharing. Here are more replies worth reading. You may want to review last week's message first at https://garyascott.com/archives/2003/05/28/832/
Here are some more replies on this matter.
"Gary, In response to your acquaintance's theory I recently received an email article referring to a very similar situation. They outlined the last three major bottoms where some extremely big player stepped in on the futures market and started buying heavily. The rumor was, especially from European observation, that the Fed was stepping in a big way to prevent a US stock meltdown, which would have obvious ramifications. I don't remember the source unfortunately, it may have been a newsletter subscription. Just filed it away in my mind."I do believe there is a lot of manipulation in the market.In the 80's a friend trading on the Chicago S&P floor had a trading systemgoing that depended on following the big houses' holdingsto expiration. Given the right situation he could come in with 100% accurate trades. He was pretty convinced about longer term manipulation of the market."This reader feels that this manipulation is a matter of fact!"Sorry Gary, where have you been? There is plenty of information about the "plunge protection team" sponsored by the Feds. The question is only how long can that game go on? With the decline of the dollar it is very important for the big money to keep the international investors in the game."
And this reader agrees.
"Gary, The markets are obviously manipulated and like your article said - the Fed is likely the only one able to have the means behind. It could however be a big investment bank with covert backing from the Fed because as you probably know, the big banks own the Fed."What the Fed can do is issue checks (money) ad infinitum. We know these checks as Federal Reserve Notes or Dollars. They can be cashed for coins (junk metal) or smaller denominated checks. That's right - what we refer to as dollars today are really pre-written checks and the Fed can buy whatever it wants regardless of the cost by writing a check for it. The check cannot be redeemed for anything but more pre-written checks."The only cost involved is the inflationary effect involved by printing more money, however the Fed has conned the world into accepting some inflation as normal and desired. As the media talks about deflation in America and Japan, the reality is that the money supply in both countries has been expanding at rates of around 7% or more per annum for the past 10 years."It seems that central banks are worried now that after so much credit creation in the Clinton era that a contraction of the money supply would be devastating to the economy and in turn to the banking system. There was a very good article on this which shows that M2 has not been allowed to decelerate to a level below a 6% increase year on year. I can't locate the article right now, but if I find it I will forward the link."
These are intelligent comments and the Fed could be concerned about a banking crisis (especially at Ginnie Mae and Freddie Mac) For more on this go to https://garyascott.com/archives/2002/07/09/592/
We are in the fourth year of a ten to fifteen year bear market and for the last 100 years the middle of each of these cycles has included a bank crash.
The last time this happened (during the Savings & Loan debacle) the fed raised their interest rates on treasury bills and allowed banks to borrow 100% on these. This caused banks to stop lending to businesses and put all their deposits into these notes. Bank profitability rose (the banks had less work, no risk and higher returns). Small businesses starved and later the U.S. dollar fell.
So we can well believe that the Fed is capable of pulling all types of stunts to keep the market expanding. Expansion is the Fed's Holy Grail and as we head towards presidential elections do not be surprised what the administration will do to get the economy rolling.
Until next message may your control be good!