from Alan Newmans article "Much of the "pressures of compliance" that are visible today have to do with what has become widely known as the "Greenspan Put." Can we deny that the Federal Reserve comprehends just how important the stock market has become? Can anyone fight against a central bank policy that is designed to promote stocks as an asset class? Of course, this is another controversial subject and none of us would like to admit that the market can be manipulated in any way, shape or form.....but it can....and it is.
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Major Crapper...I would appreciate your take on this ..Thanks
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." --- Thomas Jefferson
Major Crapper...I would appreciate your take on this ..Thanks
LLD,
In my view it is a complete myth, albeit one that is probably enthusiastically propagated by a Fed that by its own admission views propaganda as one of its chief policy tools.
In my view it is a complete myth, albeit one that is probably enthusiastically propagated by a Fed that by its own admission views propaganda as one of its chief policy tools.
Is there any doubt the fed has intervened in the currency markets? No
Is there any doubt the fed has intervened in the bond markets? No
Is there any doubt the fed has intervened in the gold markets? No
But the stock market? No way. We've got morals. We've got to draw the line somewhere.
Right. And the world is flat!
Well, I'd certainly question whether there is a direct manipulative link between the Fed and the gold market but the other market you mention are forms of money - whch is of course the business of the Fed - while the stock market is not.
If you don't believe me you need to bone up on you monetary aggregates.
Well, I'd certainly question whether there is a direct manipulative link between the Fed and the gold market but the other market you mention are forms of money - whch is of course the business of the Fed - while the stock market is not.
If you don't believe me you need to bone up on you monetary aggregates.
Based on your logic...I take it that arranging a bailout of LTCM falls under their charter as well.
That too must fall under your definition of monetary aggregates.
LTCM represented real risk to the financial system...but an 80% drop in the Nasdaq didn't?
Nope, because - like it or not - banks were not particularly exposed to the Nasdaq and therefore though a great deal of people lost a great deal of money the banks and therefore the financial system itself did not.
Stocks=equity=risk capital=could all go down the drain at a moments notice.
LTCM on the other hand were largely playing fixed income instruments that the banks do hold for their own acount. Therefore the prospect of forced liquidation of positions presented real risks of cascading price falls in markets that would have damaged banks' balance sheets.
The problem is that the fed encouraged and facilitated the bubbles, only one way to prevent the negative after effects of a bubble, do not let it happen. That is the job,imo, of the fed.
""Pretty bubbleheads preen daily on our financial networks, playing the shill to Wall Street and Washington in order to lure unsuspecting Americans into buying insanely overvalued stocks. The great market exchanges, once prudent arenas of investment where the engine of capitalism traded value for value, have become sham casinos staggering under decades of massive Fed created debt and lurching into oblivion on the greater fool theory. Yet our high level bureaucrats, led by Alan Greenspan, exhort all Americans to consume still more of their seed corn and seek still more fools." N. Hultberg
Silly me, I always thought the fed was to maintain the purchasing power of the currency. The fed can fill a lot of dikes, but one day it will all blow up . Clearly the prudent course of action was to let the liquidation take place, get rid of the rot, the imprudent, and malinvestment. The above will happen, regardless of what the fed so decrees, only it will be much worse for all the meddling.
""Pretty bubbleheads preen daily on our financial networks, playing the shill to Wall Street and Washington in order to lure unsuspecting Americans into buying insanely overvalued stocks. The great market exchanges, once prudent arenas of investment where the engine of capitalism traded value for value, have become sham casinos staggering under decades of massive Fed created debt and lurching into oblivion on the greater fool theory. Yet our high level bureaucrats, led by Alan Greenspan, exhort all Americans to consume still more of their seed corn and seek still more fools." N. Hultberg
LTCM represented a real risk to the financial system. If that isn't the responsibility of the Fed I don't know what isn't.
LTCM was the result of a system run amok. The fed stepped in to arrest a situation that threatened to bring the financial system around the world to its knees. How was LTCM allowed to amass a portfolio that was so leveraged the worlds financial foundation was in jeoprady should these "geniuses" guess wrong? Lack of regulation, the same crap that we see today only 10 fold. Sure the fed was able to delay what surely would of plunged the globe into a painful depression. But as we have seen there were no steps taken to regulate systematic risk. The gang of 22 runs wild. No regulation, no restrictions, no rules and very few care because very few know or want to know. A case can be made for the bailout in 1998. The problem I have is the lack of resolve on the feds part to insure that we never find ourselves victimized by this reckless behavior in the future. The madness runs unchecked.
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." --- Thomas Jefferson
Nope, because - like it or not - banks were not particularly exposed to the Nasdaq and therefore though a great deal of people lost a great deal of money the banks and therefore the financial system itself did not.
Stocks=equity=risk capital=could all go down the drain at a moments notice.
LTCM on the other hand were largely playing fixed income instruments that the banks do hold for their own acount. Therefore the prospect of forced liquidation of positions presented real risks of cascading price falls in markets that would have damaged banks' balance sheets.
See the difference?
"Banks were not particularly exposed..."
It's time to get up to speed. The evolution of the financial system has relegated banks to just one piece of the mosaic. Its about THE Fed's perceived risk to the system - not yours.
And whether you want to believe it or not, the simple fact is that equities fall under that category.