Here it is in plain English, how the stock market is manipulated higher. As I have written before, the Federal Reserve is defined as an unbiased economic institution. That definition suits everyone so it is treated as such. Its members are defined as the most brilliant economists on earth. All who observe them with the exception of Common Sense Economics, are satisfied that they are indeed brilliant.
The reality gap in this instance is huge. In terms of how it functions, the Federal Reserve provides a way to manifest into reality the desires of the most politically powerful people on the planet. The members of the Open Market are the most ruthless members of their profession and are driven by blind ambition. They are smart enough but actually have betters. Their betters are the economists and business people who game their activities. They are also not as smart as the best salesmen in the world who have access to them and convince them to do this that and the other. The Federal Reserve is nothing more than a way for the people who have access to them to get what they want. Or, put another way The Federal Reserve provides a way for really smart people to reap where they don’t sow.
The Federal Reserve could not create a stock market bubble sole on its own. Getting stocks to move higher without supporting fundamentals requires the cooperation of politicians who pretend not to know what is going on and the services of privateer firms.
I use the term privateer because they have so much in common with the privateer pirates who were licensed by their governments to attack and rob ships flying foreign flags. This was in the days of mercantilism. Governments and pirates had common goals, so they worked together.
Higher stock prices are good it is reasoned. All other efforts to simulate the economy have been completely exploited. The wealth effect is all that is left. Modern privateers are the firms who work closely with the Federal Reserve in a wink and nod system. High frequency trading firms and everything else is fine provided their effort move the stock market up. When the Fed is confident a firm will route newly created money into equities, that firm gets the business. The privateer firms get tips and heads up from the Fed in reward for their participation in Fed’s agenda. In other words privateer firms trade risk free. Any scam is fine as long as stock prices go up. Politicians who understand the financial markets practice the art of not knowing.
This is how the upper one percent in the U.S. has captured such a huge portion of the nations income. It is also how the poor and middle class have lost so much during the last decade. This is also how the global economy has been destroyed.
Activities such as these allocate resources so inefficiently that genuine growth is no longer possible. Soon stocks will crash regardless of privateer firms and any new stunt central banks come up with. Privateer firms are not operating out of patriotism. This a once in a life time opportunity to make mountains of money without taking any risk whatsoever.
When every possible trick has been tried, the last short is squeezed and stocks start dropping regardless of central banks, the privateers will cut and run. When the Federal Reserve is no longer of any use to them, most will flip to the short side of the market and clean up on the way down.
Make no mistake the privateers have no conscience at all. Neither do the members of the Federal Reserve.