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lquadland10 (< 20)




March 20, 2008 – Comments (2)

Estements we will be bankrupt by 2057 If you missed our overtime briefing on
Friday, David Walker resigned from his position as U.S. comptroller general.
“As comptroller general of the United States,” says David Walker, the
federal government’s top accountant, “there are real limitations on what I can
do and say in connection with key public policy issues, especially issues that
directly relate to GAO’s client -- the Congress.”
Walker left his government post to lead the newly founded Peter G. Peterson
Foundation. As the head of the Peterson Foundation, Walker will oversee the
billion-dollar endowment of Pete Peterson -- former commerce secretary, the
founder of the Blackstone Group and the Concord Coalition and legendary advocate
for government fiscal responsibility. Chief among Walker’s duties at the
Peterson Foundation will be the funding and advocating of projects that will
enhance public awareness of fiscal imbalance, government deficits and nuclear

We’re hoping that I.O.U.S.A., in which Walker plays a distinct and prominent
role, will be one of those projects. We’ll keep you updated either way. For the
full story, check out the “overtime briefing” we sent on Friday. also Bush ends
Africa tour focused on successful partnership. NEXT ARTICAL  GLOBAL REAL ESTATE MARKETS FORUM
* Realty Reality *


The Invisible Hand
(of the U.S. Government)
in Financial Markets
by Robert Bell
April 3, 2005

Summary: The U.S. government is manipulating all major U.S. financial
markets—stocks, treasuries, currencies. This article shows how it is possible
and how it is done, why it is done, who specifically is doing it, when they do
it, and where they get the money to do it.

Most people probably believe that the major capital markets in the U.S. are
basically true markets with, occasionally, maybe very occasionally, a little bit
of rigging here and there. But evidence shows that the opposite is the case—the
rigging is fundamental with a little bit of true markets here and there. I have
discussed how this works concerning U.S. and some other stock markets in an
earlier article.[1] Here I will primarily discuss the rigging of currency and
U.S. Treasury markets.

Perhaps the main reason for the urban legend that major markets are not
generally rigged is that they are assumed to be too big; the millions of
independent buyers and sellers, worldwide because of globalization, make
effective and sustained coordination impossible. The implicit assumption is that
any market could be systematically rigged if it were small enough, or at least
small enough at some critical choke point.

Little Markets

In the case of the market for U.S. Treasuries, the Financial Times summed up
exactly how small it really is in two major stories, one just under the masthead
on page one, on 24 January 2005. One story began, “During the past few years the
US has become dependent, not so much on millions of investors around the globe
but on a few individuals in a few of the world’s central banks.”[2] In 2003
these central bankers bought enough treasuries to cover 83% of the U.S. current
account deficit, and 86% of those purchases came from Asian central banks.

The two main sources of money for U.S. Treasuries are the central banks of Japan
and China. Japan held about $715 billion in U.S. Treasuries, as of November
2004, and China held about $191 billion.[3] All the other nations’ central banks
hold altogether, about the same amount again, roughly another trillion.

As the total of all obligations is about $4 trillion, two central banks
obviously hold about one quarter of the total. They are in the position to pump
or dump the Treasury market all by themselves. They can sell what they have or
simply stop buying when the Treasury sells.

Since the money comes from a handful of foreign central banks, the possible
rigging of the Treasury market equals the possible rigging of the foreign
exchange markets. These central banks have to buy dollars before they buy
Treasuries. Even Alan Greenspan has acknowledged that the two go together,
admitting that Asian central banks “may be supporting the dollar and U.S.
Treasury prices somewhat.”[4]

U.S. stock markets are also capable of being systematically rigged, and for the
same reason—a handful of players can dominate if they coordinate their actions.
The key choke point is in the number of mutual funds, which themselves hold
about 20% of all the stock in the major markets. Of the over 8000 all-stock
mutual funds, a mere 497 hold roughly three-fourths of the stock. This is easily
a small enough number to pump the market, whether through coordinated buying
disguised as programmed trading, or simply a follow-the-leader mechanism. All
the other thousands of funds and the millions of individuals around the globe
putting their money into these markets can do little more than follow the
momentum. No major U.S. stock market writer, advisor or player seems to publicly
acknowledge this, as far as I know. But the CEO (PDG) of the French insurance
giant AXA has acknowledged it: Claude Bebear wrote in his 2003 book Ils vont
tuer le capitalisme (They are going to kill capitalism):

“… today, shareholders are relegated to the role of quasi-spectators. The small
shareholders that are now called ‘individual investors’ know that they have
little weight. All together, they only represent a small percent of capital
because the investments of households are more and more in the form of mutual
funds, pension funds (fonds communs de placement) or life insurance funds. The
shareholders today are thus the institutional investors.”[i] [5]

Bebear, in charge of one of the world’s biggest stock portfolios, adds:

“We are no more, in effect, in a world that one reads in the economic text
books, with innumerable investors of various characterizations, choosing each in
his own way the stocks that he’ll put in his portfolio; the results of their
millions of decisions generating a sort of changing market equilibrium, but a
stable one. The truth is that for several years, the reasoned investment on a
stock has almost disappeared in favor of more and more mechanical behavior.”[ii]
Plunge Protection

Programmed trading in an utterly concentrated stock market pretty much
guarantees the possibility of systematic and continual market rigging. But to
accomplish this, and coordinate it with the currency and Treasury markets, some
sort of orchestrating mechanism would need to exist. It does; it is known as the
President’s Working Group on Financial Markets, occasionally referred to in the
business press as the Plunge Protection Team. Then President Ronald Reagan
signed it into existence on 18 March 1988, with the specific intension to avoid
another stock market crash such as that of 19 October 1987. The Working Group’s
existence is no mystery. See for yourself. Go to Google and type in Executive
Order 12631. You will find the Executive Order, and even a 14 November 2003
statement from Secretary of the Treasury John Snow giving a brief history of the
Working Group, describing its policy advisory activities, and concluding with
these words: “It also is a forum used to exchange information during market
turmoil through ad hoc conference calls and meetings.”

Presumably Plunge Protection doesn’t hold these ad hoc conference calls and
meetings just to be passive bystanders. Executive Order 12631 specifically
authorizes them to coordinate buying: “The Working Group shall consult, as
appropriate, with representatives of the various exchanges, clearinghouses,
self-regulatory bodies, and with major market participants to determine private
sector solutions wherever possible.”

So not only is the fix in, it is legal.

In a 1989 Wall Street Journal article, then Federal Reserve board member Robert
Heller even suggested a market intervention strategy: “Instead of flooding the
entire economy with liquidity, and thereby increasing the danger of inflation,
the Fed could support the stock market directly by buying market averages in the
futures market, thus stabilizing the market as a whole.”

Guess Whose Money is Used to Buy Stock Market Insurance?

There is even a potentially unlimited source of money to do this pumping.
Federal government contractors operate under a special law, CAS, in their
defined benefits pension plans. This gives them stock portfolio insurance,
something which small fry players would obviously like to get, but can’t find
anyone willing to issue. Should the pension funds of the federal government
contractors lose money in their investments to the degree that they fall below
minimum reserve requirements imposed by other federal laws, they can simply make
up the difference by adding it on pro-rata to subsequent items sold to the
federal government. The vast sums of federal tax money devoted to plugging the
holes in the pension fund for the largest Pentagon contractor, Lockheed Martin,
were discovered by Ken Pedeleose, an analyst at the Defense Contract Management
Agency. He was concerned about staggering cost increases for the C-130J
transport but a chart he made public showed the mind boggling per plane cost
increases for a number of Lockheed Martin airplanes. The chart amounted to a
Rosetta Stone for the military-industrial complex. It showed, essentially, how
the military-industrial complex linked to the stock market through the Lockheed
Martin pension fund, and by extension through all the others covered by the same

Is there a corresponding source of tax money to pump the currency and Treasury
markets? There is an official one for currency, the Exchange Stabilization
Fund. It was established in 1934 to prop up the dollar in foreign exchange
markets. But it can be used for any purpose determined by the Secretary of the
Treasury. In mid-1995, the fund contained $42 billion.[iii] The actual amount
varies depending on how well the Treasury does on its currency transactions. The
money originally came from the sale of U.S. government gold, but the Treasury
kept the money as a private fund, not under Congressional control. Since it is a
finite amount of money, not appropriated by Congress, it probably is not often
used to pump the stock market or even the market for Treasuries.  SEE NEXT BLOG FOR REST

2 Comments – Post Your Own

#1) On March 20, 2008 at 2:49 PM, dwot (29.30) wrote:

No question that 2057 is based on assumptions that are disasterously optimistic...

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#2) On March 20, 2008 at 9:24 PM, lquadland10 (< 20) wrote:

Now the dollar will go up and just who is proping up our dollar. We are bankrupt just read my other blogs. Soverin wealth funds will have to step in. the g-5 or g-7 bankers are manipulating the market in my humble thinking. They just don't want people to withdraw their money from the banks because the whole system will crash. If they can't cover city bank can they cover any bank? The answer is no they can't. Even if it FIDC insured. Just the cold hard facts. The country is bankrupted. Do the homework. With this week's bailout's we are stone cold broke in my humble thoughts.  Pay cash for what you want and does anyone have savings to get you through the rough time?

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