The PPT should just engineer a market crash to let a bottom settle in
- Thread starter The Kin
- Start date
All this propaganda and market support will ultimately do people's 401k's more harm than good.
All they are doing is lulling the Public back into a false sense of security so that insead of getting their money out they are keeping it in for the day when the PPT can't hold it. They will eventually sell out much lower than here.
I don't even think it is about ignorance, Bernanke is so stupid he probably thinks if he buys time subprime will eventually go back to trading at par, others are just ensuring that a certain group has time to get its message out to its members to get out.
All they are doing is lulling the Public back into a false sense of security so that insead of getting their money out they are keeping it in for the day when the PPT can't hold it. They will eventually sell out much lower than here.
I don't even think it is about ignorance, Bernanke is so stupid he probably thinks if he buys time subprime will eventually go back to trading at par, others are just ensuring that a certain group has time to get its message out to its members to get out.
What would be the PPT bottom?
Or a civil decline ...into what?
Or a civil decline ...into what?
My personal theory, which is of course just a theory, is that the Fed is defending 11700 Dow. That number would represent an official 20% correction from the highs ("bear market"), and the Fed does not want that. Look how every time this number is approached the Fed shows up with some new trick up its sleeve. Next time the dow drops below 12000 or so observe and see if this doesn't happen again.
It could just be that the Fed wants to avoid setting off a panic. How can you have a real panic when it's not even a bear market. Or, on a more cynical note, remember that this is an election year. I can hear Bush telling Bernanke "Protect against a major market downturn at all costs!" And Bernanke saying "But George, we can only delay the inevitable for so long and...." "Well, we can let John decide how to handle that next year...."
It could just be that the Fed wants to avoid setting off a panic. How can you have a real panic when it's not even a bear market. Or, on a more cynical note, remember that this is an election year. I can hear Bush telling Bernanke "Protect against a major market downturn at all costs!" And Bernanke saying "But George, we can only delay the inevitable for so long and...." "Well, we can let John decide how to handle that next year...."
It's about preventing the system from collapsing and preventing insolvent banks from being required to declare insolvency - the two are linked, although there are other reasons why bank insolvencies and thus loss of control of the banking system are being prevented.
Equities are a constituent of banks tier 1(?) capital. Clearly they are defending a stock market level - this has clearly been dictating the timing of the use of rate cuts that also has broader ramifications for bonds on bank balance sheet and the economy. The two are linked in that if mortgage bonds decline someone gets margin called and may sell equities, likewise if the stock market declines it affects banks reserve levels and equity (something they have less of every day).
http://www.markit.com/information/products/category/indices/abx/history_graphs.html
Stock market yu can see for yourselves.
As for the economy I mean really, if it takes approximately 6 months for a rate cut to feed through to the economy do they really need to come in and cut days justdays before a FOMC meeting? There is no credity creation from the rate cuts yet, banks are just pocketing the spread. There will be no credit creation while banks are shoring up their balance sheets and little in the way of lending until clearing takes place. Liquidity trap. Cuts may reduce the extent to which banks start calling in loans they previously made.
Equities are a constituent of banks tier 1(?) capital. Clearly they are defending a stock market level - this has clearly been dictating the timing of the use of rate cuts that also has broader ramifications for bonds on bank balance sheet and the economy. The two are linked in that if mortgage bonds decline someone gets margin called and may sell equities, likewise if the stock market declines it affects banks reserve levels and equity (something they have less of every day).
http://www.markit.com/information/products/category/indices/abx/history_graphs.html
Stock market yu can see for yourselves.
As for the economy I mean really, if it takes approximately 6 months for a rate cut to feed through to the economy do they really need to come in and cut days justdays before a FOMC meeting? There is no credity creation from the rate cuts yet, banks are just pocketing the spread. There will be no credit creation while banks are shoring up their balance sheets and little in the way of lending until clearing takes place. Liquidity trap. Cuts may reduce the extent to which banks start calling in loans they previously made.
Quote from Landis82:
You mean the FED isn't trying to keep the Economy from heading into a DEFLATIONARY collapse due to a lack of credit creation?
Banks don't lend if they believe the Franklins going out will be Lincolns coming in. It's called lack of confidence in the currency and in the FED that is diluting it. That's why the "credit crisis" the FED purported to heal starting last fall is far worse for the medicine.