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The Fed bombed the market - I ask, "Why?"
Last evening I got the WSJ breaking news story that busted the global capital markets today. Note the time, 8:06.
Look at the immediate consequence to the EURDLR fx rate. There are big gaps down for EUR shortly after the story hit the tape in Asia. That knee jerk reaction was the same market “read” that gutted a number of Euro banks today:
I looked at the WSJ story and concluded that it was a game changer. I wrote Tyler Durden at Zero Hedge about this. The “Re:” that I used was:
Stink on Shit
TD responded:
Obviously a plant.
ZH had a piece today on the WSJ story that caused all the trouble. The “plant” theme was repeated. from the ZH article:
Why would (the Fed) use its traditional mouthpiece the WSJ to spread fear?
Tyler answers his own question with:
Why QE3 of course.
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This is very important stuff. Three critical questions:
I) Was the WSJ story a plant?
II) If so, who planted it?
III) Why in heaven’s sake would anyone (especially the Fed) want to bomb the capital markets?
IMHO opinion this was a plant. The author was Carrick Mollenkamp. This guy is a seasoned pro. This story was vetted at the highest levels at the WSJ. The editors knew full well the implication of this article. Every ‘i’ was dotted and all quotes were checked. There are no mistakes in this article.
But who were those “sources” that the WSJ hung their hat(s) on? This was one of the biggest stories of the year. Who are the readers of the WSJ supposed to rely on regarding the serious issues raised in the article? Easy. No one is the answer. These are the attributed sources for the guts of the story:
Federal and state regulators, signaling their growing worry that Europe's debt crisis could spill into the U.S. banking system, are intensifying their scrutiny of the U.S. arms of Europe's biggest banks, according to people familiar with the matter.
The Fed is demanding more information from the banks about whether they have reliable access to the funds needed to operate on a day-to-day basis in the U.S. and, in some cases, pushing the banks to overhaul their U.S. structures, the people familiar with the matter say.
Fed officials recently have held meetings…………. according to the people familiar with the matter.
The New York Fed has also been coordinating with New York's superintendent of financial services, Benjamin M. Lawsky, to monitor the foreign banks' funding positions, said people familiar with the matter.
You can come to your own conclusions on this. It is my opinion that there is no way the WSJ could have run this story without direct confirmation from the Fed. Those people who are so “familiar” with this matter are senior Fed officials.
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That, for me, answers #s I & II above. But it begs the question, “Why”?
Is it remotely possible that the Fed deliberately engineered a collapse in markets in order to get the necessary political “cover” to initiate some new massive monetary policy as TD suggeted?
There is one possible clue in the article that points to this conclusion:
Until recently, that (Euro funding problems) hasn't been a problem. Thanks partly to the Federal Reserve's so-called quantitative-easing program, huge amounts of dollars have been sloshing around the financial system, and much of it has landed at international banks
This observation from Mollenkamp is from the Feds lips. The obvious conclusion from this paragraph is that to reverse the crisis now boiling over in Europe more “QE” is required.
What is QE? It can be anything that stimulates the price, velocity and availability of money. It does not have to be LSAP (traditional QE) or an extension of ZIRP. It can take other forms.
The most convenient of which is to open the Fed’s $ swap lines to the Euro banks. We may get this development by Monday morning.
My take on this is that the Fed manipulated the news. It did so very deliberately. The Fed had an agenda; they did whatever they thought necessary to gain acceptance for what they have up their sleeve.
The story was deliberately timed to undermine (further) the European banks. It worked. Now Bernanke and his cohorts have the excuse they need to act.
That's my take on this story. We may never know the truth. I wonder if Governor Perry understands this stuff. If he did, and he got the facts on this “out there” he would have a very big cannon to shoot. If the Fed did manipulate both the press and the markets to justify its actions it would be a very big deal indeed.
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WSJ ... yeah ... and they do exactly the same sort of things to spread unattributed tales of impending terrorist calamity, on a regular basis - globally.
So you're most probably right-ish Bruce.
WSJ = piece of shit govt propaganda black-op/blackhole
Bruce, so would we assume there is a correlation between this story and also the Fed lending the SNB $200 Million today?
Perhaps SNB went whining to The Bernank about how no European bank would loan them bux. If the dots are this easy to connect, either I'm getting smarter, or the dots are glowing brighter!
You betcha.
Do you trust Mr. Murdoch?
gh
300 cc's of ringers lacate please........
Rupert Murdoch would not allow this to happen at the WSJ.
since the sp downgrade..........its all planned now
good news suze orman is on cnbc giving advice right now!!!!!!!!!!!!!! good quality mutual funds and hope that it goes down because this is for the long term
Mollenkamp must be tapping Bernanke's phone.
i'm sure Ron Paul knows this stuff and i wouldn't be surprised if it gets ripped off (and softened up) by someone or other.
nice sleuthing BK, you gotta a nose for these sort a things. Monsieur Pittman would be proud.
I agree tip e. Bruce has the air of genuine investigative writing that is really re-freshing.
Great work BK.
ORI
They will not let these banks go down without a fight it's as simple as that. I personally look for the Fed to start buying corporate paper. Bank paper especially but to make it look good a little of this paper and that paper and so on. They tried putting the funds through the banks last time and it did not grow GDP at all. So I bet this time they try giving the funds to the corporations in the form of negative real interest rates in the hopes that the corporations use the cash to build plant and equipment. I bet what happens instead though is they end up privatizing a bunch of public assets that should not be privatized. Basically more organized theft. As to Gov perry don't hold your breath. If you speak out against this they will deem you "un-electable" like they do Ron Paul.
Unless Perry becomes the Ron Paul spoiler by swaggering his way through many of Paul's key positions. Perry is a tool. The only question is whose tool.
They are ALL tools! They don't get serious donations and airtime unless they ARE a tool.
Why are you even giving him any legitimacy at all by discussing him?
Secede or die!! That is the only credible choice at this late stage.
I won't argue that it isn't too late. At best, it seems to be just a couple minutes til midnight.
But for those who feel they need to do something with their remaining time, other than stack gold and ammo (and I don't mean that as criticism by any means), Dylan Ratigan has turned his show into a vehicle for demonstrating public support of a constitutional ammendment banning private money from politics.
He's going for 100M signatures. Sounds cheesy? Maybe . . . but it's just the kind of thing TPTB--including their current tools in government--would have to contend with. Especially when it's publicized daily on TeeVee. Fact: at least 99% of the population believes money should be banned from politics. Even the politicians agree in principle. So, if we have anything remotely resembling a democracy, this should get done. And, if it doesn't get done, what does that unmistakably demonstrate . . .
Sure, he's likely to get fired, Spitzered or suicided before that point, but he seems aware of the risk. And he don't give a shit.
It looks for real to me.
EDIT: He's on the evil channel (MSNBC) at 4 EST daily.
That just happened, right?
"Sloshing around."
I could see Bernanke saying that, "Oh, dollars are just sloshing around."
Also, no need to give Perry any free press. Dude is a total douchebag and does not know his ass from a hole in the ground.
That's what'll make him eminently electable by the ignorant masses ... he's one of them! (like Reagan, Carter, Slick Willie, Dubyah and Obomber) ... and they'll like his hair ... don't forget the hair (it nearly got JFK in without Joe's vote-buying)!
Fuck. it must suck to be Mollenkamp. A stooge for the Fed, assisting millions in losing money in some ruse to help out bankers. Diddled just like some cub reporter.
Looks like we didn't have to wait long for the opening of the swap lines to aid SNB.
So, the story was a plant, to achieve a desirable market reaction, to serve as cover for an action the Fed wanted to take before it told WSJ to run the story (what a bunch of stoolies the WSJ are, but that's for another day.)
What deeper problems loom that we are not seeing - although I give ZH credit for seeing the most of what is "really" going on. Where is this headed? Is Europe (or really, its banks) so broke that the EU cannot function? and if it is the banks, the EU has no ability to deliver the TARP solution (which is of course bullshit and served no purpose here except to enrich the elites.)
+$1865.5! How can you be broke when the press hasn't run out of ink or paper?
Just read Atlas Shrugged and it all becomes clear. Then read it again and again and again...
+A=A
Get a fucking life. The banksters running this show would only gain more power if Ayn's simplistic view of reality were to be implemented. If you want to join a cult, find something that involves Peyote or something interesting at least. Rand believers think on a 7th grade level. Get over it.
Rand was good. She was from a communist country and knew what she was talking about. She's like Orwell with more fully developed ideas of the morality of achievers that make civil society work and the immorality of the moochers and looters --- the bankers and politicians that are parasites of the free market system.
Buying PMs is just one way of going Galt and boycotting. Even the Chi-knees are getting in on it.
Better than Orwell? Now that is blasphemy! Orwell had integrity, both intellectual and moral. Rand was just a hack playing a violin with one string.
Precisely!
And let me add here that while Ron Paul has some excellent ideas just the very fact that he went on the record and stated that he doesn't care if Iran develops nukes renders him an out of touch crackpot. Sorry. I aint voting this time around.
Ok. Seriously.
I can't stand this. How did
"It's predictable that Iran could see a benfit in making nukes."
and
"I don't believe that Iran is making nukes. Our own CIA doesn't think Iran is making nukes."
turn into
"Ron Paul doesn't care if Iran develops nukes"
???
He said he sees why Iran might want one, but that the CIA doesn't think they're making one.
Bit different, eh? (Maybe not for the masses, though?)
Bingo. RPs point was it isn't surprising they are trying to develop them. They are surrounded by countries (or occupied countries) who's forces have nukes. The US has Iran surrounded...I could see them being paranoid.
The way we fucked Iran over they deserve nukes. Hell, we should give them some.
Wait, I take that back. If Iran had nukes maybe Israel wouldn't be able to fuck over the Palestinians. That's a problem, right there.
Yo angry man (or woman), here's a tip for you: Ayn predicted exacly today's "complicated" present.
I think your "untempered" and "simplistic" response to a Galt reference puts you in the 6th grade. Get over it.
"Ayn predicted exacly today's "complicated" present."
maybe true, but then again, so may have Karl Marx.
Marx did predict it. Ayn Rand - I read when I was young and .... whatever.
In terms of finding any solutions, we need to look at what is happening now - not 40 years ago.
Marx didn't predict it, he was happy to start it.
Ironically, Ayn Rand's philosophy has been selectively implemented by the likes of Greenspan, with predictable and massive failure the result. To believe Rand's philosophy,you must ingore human nature and worship the cult of selfishness. How surprising is it that bankers left without rules would create the mortgage bubble that enriched them and improvished society? Not suprising at all, except to Randers who continue to ignore reality and jump on their couches like some crazed movie star on Oprah. You know the one. He and you are basically the same, only he's richer.
How surprising is it that bankers left without rules would create the mortgage bubble that enriched them and improvished society?
Bankers left without rules? LOL, banking is one of the most regulated industries on earth. More to the point - in economies where the government mandates what is to be used as money, (ie, pretty much all of them now) bankers can expand the money supply hugely because the government grants them a cartel of money creation - ie, banks rape us all because of the rules.
I think Tom Cruise is an L. Ron Hubbard disciple of Scientology. Is that the same thing?
See Murray Rothbard on Ayn Rand... she was an idiot
The plot thickens:
http://www.lewrockwell.com/rothbard/rothbard23.html
Crappy book. Better insight is to be had by reading The Rise and Fall of the Third Reich. The policy is set in advance and all the rest is window dressing to justify the policy.
+1000 - Rand was a fucking moron; a racist ideologue whose private life mirrored the 'correct line' fucktardery of Soviet apparatchiki of the likes of Beria. Look no further than the sort of opportunistic dingbat who sniffed around her: Alan Greenspan... 'nuff said.
I know Rothbard was also part of that circle, but eventually he was able to get past ethno-cultural loyalties (ahem) and declare that Rand was a narcissistic old trollop who never had an original idea that wasn't retarded... whereas Greenspan never figured that out.
Her books are shitty cartoonish drivel of the worst type - almost as internally inconsistent as anything Marx and Engels slapped together: I'm not a big rap for the French anarchist philosophers, but even Proudhon makes Rand look like a mongoloid amateur... because she was.
Outside America Ayn Rand is a joke.
Nice review of Rand. She wasn't one for subtlety. Just look at her "objectivist" philosophy. Nobody could say that she is in the same league with Proudhon. But for some reason, the libertarians like her. But then, I'm still not able to figure out what the libertarian philosophy is or whether they even have a philosophy. It seems to be an artifact of Silicon Valley, judging from the people I know who espouse it. I think it is that they don't like government. Well who does?
An now on to Mary Baker Eddy...
Every self-professed "libertarian" I've come across is in favour of a government-run military ... which means taxation to support it and "make work" imperial war-mongering to "fix" other places. Sheeeeesh!!
Guess you haven't met all of us then!
"Dreams Come Due, Government and Economics as if Freedom Mattered", ISBN: 0-671-61159-3, by John Galt.
The book is dated, but many of the things it talks about are still valid today
I didn't mean to paint all libertarians with the same brush ... just all those I've met or debated on the net. And fanatical Ron Paul supporters (in general) are no different, IMO.
I'm an an-cap and found this interview of Mike Benoit, the head of one of Ron Paul's campaign teams in SoCal, to be a terrible embarassment. Benoit hasn't a fucking clue about what RP has been explaining for 40 years on the Fed and the money supply ... or what RP is specifically going to do to fix it. He must just like RP's hair!!
http://www.youtube.com/watch?v=38EtJFcvVqQ&feature=related (this is part 2 of 4)
You guys are letting this guy shape the conversation. Better to get back to what Bruce was saying (even though I usually don't agree with him :)
"Outside America Ayn Rand is a joke."
Oh, she's a joke in America. We just have a lot of morons who don't get it.
Including a lot of the morons in power, unfortunately.
Who do you like then?
Me