10:44a ET Tuesday, October 18, 2005
Dear Friend of GATA and Gold:
Tomorrow's Asia Times, published in Hong Kong,
reprints from an Internet journal, Japan Focus,
a long article about the latest report by John
Embry and Andrew Hepburn of Sprott Asset
Management in Toronto, "Move Over, Adam Smith:
The Visible Hand of Uncle Sam." The Sprott
report, as you may remember, compiled the
evidence of frequent U.S. government
intervention in the equities markets.
While there seems to be no acknowledgement
of the Sprott report within the United States,
the report IS getting around the world and will
have its effects.
The Asia Times/Japan Focus article is appended.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
U.S. Stocks: The Visible Hand of Uncle Sam
Asia Times, Hong Kong
Wednesday, October 19, 2005
http://www.atimes.com/atimes/Global_Economy/GJ19Dj02.html [1]
From Japan Focus
John Embry and Andrew Hepburn provide a valuable entry into the world
of finance. The two analysts illuminate the shadowy trail of
the "Plunge Protection Team" in its apparent mission to rig the
American stock markets.
Their account is backed up by considerable indirect evidence, as well
as statements by credible insiders. If their account is correct, it
means that US markets look a lot like the Japanese markets that were
long derided for being subject to repeated official
manipulation. A more important conclusion may be that US markets are
even shakier than many believe.
The trail that the two analysts follow is long, dating to just after
Black Monday, October 19, 1987. On that day, the US stock market
abruptly crashed. The Dow Jones average dropped by 508 points, to
1738. It threatened to do even worse the next day when, after a brief
rally, it went into reverse.
The markets seemed on the edge of a meltdown, but the abyss failed to
open up. This lack of a meltdown has generally been attributed to the
Federal Reserve Board's (FRB) steady hand and promises of liquidity.
But sophisticated research on the events of those two days indicates
that a sudden and unprecedented rise in the Major Market Index (MMI)
sparked a recovery across the board. There is good reason to suspect
that this recovery was the result of concentrated buying by a few
firms.
It was after this crash that the President's Working Group on
Financial Markets was put in place to prevent destabilizing declines.
The Plunge Protection Team was institutionalized in 1989 as a follow-
up from this working group, and originally included the top public-
sector financial authorities.
Its role was apparently tested with the Friday, October 13, 1989
stock crash. In this case, too, a sudden rush of aggressive buying of
index futures contracts via the MMI saved the day. There appear to
have been a considerable number of interventions in the wake of that,
with the group expanding to include the heads of major banks.
Thus, for example, the markets after September 11, 2001, received a
heavy dose of intervention. The need for this intervention was so
great that its outlines emerged quite clearly in the press.
The Japanese, not surprisingly, appear to be part of the scheme as
well. The authors show that there was plenty of consultation between
Japanese financial authorities and their American counterparts in the
lead-up to the Iraq War. There are also strong indications that the
markets were not left unfettered to render their own verdict on the
wisdom of the war, in the anxious days leading up to its outbreak.
There is abundant evidence adduced in the article. It is important to
note that the authors are not against intervention per se. They note
that letting plunging markets fix themselves could result in economic
chaos. But they do warn that the secrecy and growing involvement of
private-sector actors threatens to foster enormous moral hazards.
Major financial institutions may be acting as de facto agencies of
the state, and thus not competing on a level playing field. There are
signs that repeated intervention in recent years has corrupted the
system.
This aggressive manipulation of the system took place on Alan
Greenspan's watch as chairman of the FRB. The authors don't discuss
the fact that Greenspan is to retire at the end of next January and
the White House is having trouble finding a replacement in whom the
markets will believe.
It may be that no credible candidate wants to take the baton from
Greenspan at a time when it seems likely that the market will
implode. Observers note that earlier changes of the FRB chair have
generally been followed by much buffeting in the markets as they test
the new maestro.
Market drops are common. Present risks include the American housing
bubble blowing out, oil prices exploding, and inflation blowing in,
at a time when the twin deficits of trade and budget are already in
the troposphere.
This situation points to the likelihood that the Plunge Protection
Team will be working overtime early next year.
----------------------------------------------------
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http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html [27]
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http://www.miningstocks.com [29]
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http://www.SilverSeek.com [33]
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(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm [36]
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Ted Butler silver commentary archive:
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----------------------------------------------------
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----------------------------------------------------
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