Gaming the Federal Reserve

market-manipulationI am the only economist in the world who treats the Federal Reserve strictly as a political body carrying out political agendas. The Federal Reserve Open Market Committee has decided for now not to raise interest rates. The Fed is charged with the responsibility of continually elevating asset prices. Market manipulation is often attributed to the mysterious group some call the Plunge Protection Team or the President’s Working Group on Capital Markets. The concept of a formal organization serves as a stalking horse and carries some credibility with it. The euphemistic mind has trouble conceiving of an unofficial group that moves the market up for their own benefit without any regard for the rest of the country. But, that is exactly the way it works.

What is called the Plunge Protection Team is actually a consortium of criminal enterprises working together to enrich themselves only. Any statute they violate is never noticed. Of course the day of the Fed’s interest rate decision was changed from Wednesday to Thursday so that it would receive no attention during the CNN Republican Debate.  No questions were asked of the candidates that had anything to to with Federal Reserve policy or central economic planning. This is no accident.

The ideal circumstance for a criminal organization is simply to skim a little profit off of each transaction within the market they are exploiting. This is the basic goal of the high frequency trading firms. It is not the speed at which they operate that is directly harmful to investors. It is the speed that allows them to successfully compete with each other. The high frequency trading firms could operate a lot slower and still run stops and entice traders into unprofitable situations. The faster a firms operates, the more trades it can sabotage and exploit.

From my vantage point as an euphemism-free economist, it is clear that the criminals are not making the profit they need and expect any more. The advantages the  Federal Reserve provides them may not be enough to guarantee their continued participation on the Fed’s behalf. The efforts to elevate equities this week have been enormous. Today, September 17, is what I call an up-no-matter-what day. On these days, prices are supported aggressively all day. The VIX gets hammered and no stock that has been green is allowed to go red. Today, The Dow 30 closed down anyway. Some indexes closed higher. The Russell 2000 is easy to control because the entire Russell 2000 has about the same capitalization as one Dow stock. The Russell 2000 closed higher.

The criminals prosper by getting exclusive information from the Federal Reserve. With that advantage, their profits have been guaranteed up to this point.  The criminals may have actually taken a loss today. Probably they did. Even though I am playing it cautiously, I am completely sure the criminals will disappear from the long side of the market when the Federal Reserve’s information no longer guarantees a profit. When that happens, the market will crash because it is only by virtue of the criminals that the market is going up at all.  That is why I keep 20% of capital on the bearish side.

What investing comes down to is knowing the economy is being destroyed by the Federal Reserve and central economic planning, while stocks are pushed higher for the profit of a few. One of two things will happen first. The nation’s economy will be gutted to the point where losses are so great that no organized effort is enough to prevent lower prices. Or, selling pressure will become so great that the high frequency trading firms can’t prevent a drop. Their algorithms may become unprofitable and they might exit the trading arena.

The failure of the economy and the financial markets is guaranteed.

The Grazin’ is Good, by Curbside Jimmy.

Available at:  Curbside Jimmy’s Free mp3 Download Page





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About Fantasy Free Economics

James Quillian independent scholar,free market economist,and teacher of natural law. Who is James Quillian? Certainly I am nobody special, Just a tireless academic and deep thinker. Besides that, I have broken the code with respect to economics and political science. Credentials? Nothing you would be impressed with. I am not a household name. It is hard to become famous writing that virtually no one in the country is genuinely not in touch with reality. But, if I did not do that, there would be no point in my broking the broken the code. If you read the blog, it is easy to see that there are just a few charts, no math and no quantitative analysis. That is not by accident. Given what I know, those items are completely useless. I do turn out to be highly adept at applying natural law. Natural law has predominance over any principles the social science comes up. By virtue of understanding natural law, I can debunk, in just a few sentences , any theory that calls for intervention by a government. My taking the time to understand the ins and outs of Keynes General Theory is about like expecting a chemistry student to completely grasp all that the alchemists of the middle ages thought they understood in efforts to turn base metals into goal. Keynesian theory clearly calls for complete objectivity. Government can only make political decisions. Keynesian techniques call for economic decisions. So, why go any further with that? Fantasy Free Economics is in a sense a lot like technical analysis. Technical analysis began with the premise that it was impossible to gain enough information studying fundamentals to gain a trading advantage. Study the behavior of investors instead. Unlike technical analysis, I don't use technical charts. What I understand are the incentives of different people and entities active in the economics arena. For example, there is no such thing as an incentive to serve with life in the aggregate. In the aggregate, only self interest applies. It is routinely assumed otherwise. That is highly unappealing. But, I am sorry. That is the way it is. I can accept that because I am genuinely in touch with reality. Step one in using Fantasy Free Economics is for me to understand just how little I really know. A highly credentialed economist may know 100 times what I do based on the standard dogma. Compare the knowledge each of us has compared to all there is to know and we both look like we know nothing at all. There is always more than we don't know than what we do know. I am humble enough to present myself on that basis. Why? That is the way it is. I am not bad at math. I have taught math. What I understand is when to use it and when to rely on something else. Math is useless in natural law so I don't use it. While others look at numbers, I am busy understanding the forces in nature that makes their numbers what they are. That gives me a clear advantage.
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