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Posts Tagged ‘economic meltdown’

In 1605,  Guy Fawkes and a group of conspirators attempted to blow up the British Parliament House, and, in the process, kill the members of Parliament and the Protestant King James. Their goal was merely political – they just wanted to restore a Catholic king to the throne. Fawkes was caught and ultimately put to death – after he confessed (under extreme torture) to treason and implicated the other conspirators. Guy Fawkes Day (November 5th) was then created as a reminder to the citizens of England of the horrific consequences, i.e. horrific torture, that would be dealt to any other persons who attempted to overthrow the government. Interestingly, Guy Fawkes Day now seems to be more a rallying day for people who despise the current government of England. It would seem that perhaps not everyone thinks that treason is a bad thing.

Which brings us to the current day.  Most of us are aware that over the past week or so the American public lost a great deal of money in the stock market. On August 8th alone the market lost over $1,000,000,000,000.00 (One trillion dollars). A good deal of this money was from 401k investments, upon the earnings of which many Americans hope – or had hoped – to retire. Now they have lost any not only the earnings they might have accumulated, but they also lost a good amount of principal too. How could this have happened? How could the entire world have become so frightened that a worldwide selloff was triggered? Was it simply because a rating agency (S&P) published an opinion that downgraded the U.S. from a AAA risk to a AAa risk? Or was it something else?

The events that led up to the S&P downgrade are indicative of a pernicious attitude among some people in our Congress. Clearly, one expects the opposition party to oppose the agenda of the majority party. That is the way democracies always work. However, our democracy is no longer a functioning democracy. The opposition gang decided to refuse to compromise until the 11th hour. They were playing “chicken” with the welfare of the country, like a bunch of ignorant children, unaware that they are playing with fire.  And the world is scared.

However, these were not children. They were intelligent men. They knew what they were doing. They were well aware of the potential catastrophic effects of their refusal to bargain in good faith for the “good of the country”. These men, who had all sworn to uphold the Constitution, had, with their eyes wide open, driven the bus over a cliff. Why? There is, of course, only one reason – wealth. The Party of individual wealth had decided that they owed nothing to the American people. Their loyalty was only to their own individual wealth – their businesses, their cronies,  and  their Party – loyalty to the Party was paramount (just like in Nazi Germany and the Soviet Union). And they stayed loyal, until at the last possible moment – then they grudgingly made a miserly deal. But it was too little and too late. S&P had seen enough. These guys in the Party were not working for the people of the United States – in fact they were harming the people of the United States. And they didn’t care. S&P had no option but to advise their worldwide clients to beware because the U.S.A was no longer a stable country, and you could no longer rely on the government’s ability to pay its debt. All because of the uncaring, foolish zealots of the Party.

Today, the entire world is still feeling the aftershocks of this pernicious collusion in Congress. Today the economy of the U.S., Europe, and Asia are all weaker because of the fanatics who have been elected to Congress. The problem is apparent to the world. Congress has been seized by a group of fanatics, zealots,  and true believers in crackpot economic theories, and others who just want to profit from the collapse of the U.S. economy. How can a member of Congress, in good conscience, sell the U.S. economy short? How can these people, elected to do the will of the people, cause such economic devastation and still hold their heads high?

Legally, these activities are not treason in the U.S. However, they hardly indicate love of country, or a sense of duty. These people clearly have no feeling of empathy for the economic ruin their activities have caused and will continue to cause to millions upon millions of innocent Americans.

Call it what you will, but as far as I am concerned, T is for treason.

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If there is one thing that everyone in America seems to be able to agree on, it is this: we are in big economic trouble.  After having a near miss with a second Great Depression, we are unsteadily moving towards a state of continuing economic uncertainty.  It’s not just us; it’s the whole world. Spain, Greece, and Portugal are now in deep economic trouble and if they default on their debts the euro and the entire European economy could be endangered.  China, now the prime manufacturer for the world, and the principal holder of U.S. debt obligations, is mostly concerned with their own economy, not ours; except that their economic fate is inextricably linked to ours. If we go down, they go down.  That is something they would really like to avoid, so they are taking their own self-protective steps to strengthen their currency and prepare for a second round of economic bad news.

Everyone, almost everyone anyway, seems to feel we spent a huge amount of money in forestalling the complete meltdown of our banks. We did this with borrowed money – money that was essentially borrowed from China and will eventually have to be paid back.  The problem is that we are very close to being in a situation where as a nation, we spend more than we earn. And it looks like this imbalance will only get worse in the coming years.  It is a recipe for economic disaster.  We either have to earn more or spend less. The problem with earning more is that our multinational companies have outsourced so much production to China and other countries that it is now really hard to earn more money. We just don’t make enough stuff here anymore. So what’s left? Cut expenses. Spend less.

Immediately, the right wing goes after the entitlement programs, since, philosophically, they have always opposed them. Slash Social Security, cut Medicare and Medicaid, eliminate anything that smacks of helping people – and let’s don’t even talk about universal health care. On the left we hear about different types of cuts. Recently President Obama said he wanted to cancel NASA’s plans to go back to the Moon.  He also wants to tax the banks and the rich folk (makes sense – after all, that’s where the money is).  There is one thing no one talks about. The big 800 pound gorilla in the room, the Emperor’s unmentionables, the biggest ticket in the U.S. budget, the Mother of All Budget Breakers: Defense Spending. There – I’ve said it.  That which must not be said. The ledger which must not be looked at. The sacred amount, the holy of holies which must not ever be questioned: it is this one little item that is bleeding the life blood from our country.

Whoa, pardner. Wait just one cotton pickin’ minute, Glenn Beck might say. How do you figur’ that?  How come I’m not going after that big money waster, Social Security or Medicare? Well, for one thing, I’ve already paid a lot of money into the Social Security/Medicare Ponzi scheme and I want my money back some day. And I’ll get it too, and so will you, just so long as the population keeps growing – the key ingredient to any Ponzi scheme.

Defense spending, on the other hand is different. A lot of it goes to defense contractors who get their contracts via lobbyists and cozy relationships with our Senators and Congressmen.  They build all sorts of useless things like B-1 bombers and nuclear powered aircraft carriers.  They spend a lot of money on their own version of entitlement programs like huge pensions for retired admirals and generals, free medical care, free or low cost housing, food, clothing, schooling, transportation, recreation, you name it. Talk about Socialism, talk about entitlement programs, this is the King of Entitlement programs. We all know this, but it’s unpatriotic to say so, so we keep quiet.  For a great many people, the military is a jobs program, except for those unlucky few who wind up in actual combat, of course. The thing is that vast numbers of military people never come within a thousand miles of combat. The truth is that most of our weapons are never used. The truth is that the military is the largest old boy network in the country.  It is a system where you make alliances for life.  These alliances are used to get jobs in industry after people leave the military or in the government itself where you can find groups of people working in the same office who “just happened” to know each other in the service. We all know that – we just don’t talk about it.  It’s not patriotic to say that.  The thing is this: having a nice and safe, cushy career in the military and then retiring to a fat job in government or industry while collecting a fat pension is not the same thing as dying for your country in the rocks and sand of Afghanistan. But we act like it is.

The simple fact is this: our military budget is horrendously bloated.  Our military spending is way out of line. We buy the wrong weapons.  We have the wrong strategies.  We have the wrong number of people.  We are wasting enormous amounts of money on our military budget, and like a drug addict or an alcoholic, we can’t stop.  Defense spending is our sacred cow. It must not be questioned.  It must not be cut. It is killing us financially, but we won’t and we can’t admit it.

Here’s something to think about: how many years has it been since 9/11? It’s getting close to nine years. So how is our military doing fighting this war against terror? Well, let’s see….we bombed Afghanistan and toppled the Taliban, but we didn’t get Bin Laden. We invaded Iraq and killed Saddam Hussein, but we didn’t get Bin Laden.  We’re back in Afghanistan but we can’t seem to locate Bin Laden. Nine years our military has been fighting yet still we face possible terrorist attacks from Al Qaeda every day. Does this mean our military isn’t up to the job? No.  It means that this is not a job for the military.  Remember when Cheney said that the war against terror was going to be a clandestine war and we wouldn’t hear much about it? Well, that was about as close as Cheney ever got to the truth. We are not going to defeat Al Qaeda with armored columns or stealth bombers or aircraft carriers or 20,000 Marines. We don’t even know where they’re hiding.

After World War II Europe pretty much disarmed. We didn’t. Neither did the Soviets. President Reagan drove the Soviet Union into bankruptcy by accelerating the arms race. Massive military spending didn’t help the Soviet economy, it killed it. Even so, we don’t learn.  We continue on, preparing to fight multiple simultaneous wars on different fronts, like the Cold War never ended.  We’re spending enormous amounts on the War on Terror at the same time.  More than anything else it is this unconstrained defense spending that is destroying our economy.  Why? Because the military does not create a product. Money goes in but no consumer products come out. It isn’t a business. Money spent on defense is not an economic stimulus, it is a burden on the taxpayer – a burden we have to acknowledge and sensibly reduce. This doesn’t mean we stop fighting Al Qaeda, it means we have to fight in a more productive, intelligent, and clandestine way – but not the way of the military.

Our problem is that we cannot even talk about this. Our problem is that we have a corrupt system that continually increases defense spending in ways that are not useful or effective. Our problem is that, more than anything else, defense spending is killing our economy and we won’t admit it; we are afraid to admit it.  Our problem is that defense spending has become our sacred cow and it has become unpatriotic to question anything about it. Even so this will end, either when we get up enough courage to honestly debate defense spending or when our economy simply collapses and defense spending, like everything else, simply withers away.

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Last week the U.S. Department of Justice announced the formation of the new Financial Fraud Enforcement Task Force. Among other things, this task force is charged with bringing to justice those individuals who caused the worldwide economic collapse. Ummm… OK.  So…does that mean that nobody was minding the store before this? Does this mean that until now there were no laws governing the financial industry or does it just mean that the Department of Justice just wasn’t paying any attention to those existing laws?  Well, let’s see…if they are planning to find and prosecute those people who created the meltdown by deliberately misrepresenting the value of mortgages on the resale market, or if they will be going after the people who deliberately gave out “liar loans”, knowing full well that the people who were being granted the loans could never pay them back, or if they will be going after the people who fraudulently misrepresented their ability to pay for the mortgages in order to play “buy and flip”, I guess that means that there were already laws against these practices. Otherwise they would have to create new laws outlawing past practices, which I believe is frowned upon.

So…if there were already laws on the books that made it illegal to do all the things that led to the meltdown, I have a small question. What were the agents of the Department of Justice doing while the world was collapsing?  What were they doing in the years leading up to the collapse?  Come to think of it, what were all those guys over at the Securities and Exchange Commission doing while the world was hurtling toward the cliff edge?  I think we all know.  They weren’t doing anything to prevent it. Which is why when several people reported Bernie Madoff’s Ponzi scheme to the SEC they were ignored.  Of course, when Bernie’s scheme collapsed and a bunch of rich people lost everything, well…the government had to step in.  Didn’t they?

OK. So how many of those people at the SEC who deliberately ignored Bernie Madoff’s practices over the years have lost their jobs? Better still, how many have been prosecuted for allowing a massive Ponzi scheme to exist when it was their sworn duty to prevent such things from happening?  Or are we saying that no one had the duty to protect us from this sort of fraud? Or are we just that we’ll overlook this dereliction of duty this time?

OK, since we are on the subject…how many people at the Department of Justice are being investigated for doing nothing to prevent the worldwide economic collapse when it was their job to detect and prevent all the sorts of fraud that led to the meltdown?

And, if we want to start looking within the government for people who are culpable (and why shouldn’t we?) should we just confine our investigation to the ranks of the Department of Justice? Does that make sense?  Let’s face it.  This was a truly massive exercise in deception. Our big banks (the ones we saved because we can’t live without them) were selling billions (trillions?) of dollars worth of worthless mortgages to any sucker in the entire world who would be foolish enough to invest in them. Now, I find it hard to believe that there weren’t a lot of people higher up in the former administration who knew exactly what was going on. I expect that most of the wealthy bankers knew too.  All the rich folk were playing a sort of real estate roulette via misrepresented values of U.S. real estate and the mortgages that encumbered these properties.

So, now we have a new Task Force.  Oh, good.  But somehow, I just sort of feel that this small effort is not going to clean out the Augean Stables of Washington or Wall Street.  More likely, it will be more of the usual Washington window dressing.  Oh sure, they’ll probably nail a few unfortunate suckers who were stupid enough to get caught, but the big racketeers who were behind this gargantuan fraud? I don’t think so.  The oligarchs are too deeply embedded, the invisible wealthy have too much power. The real perpetrators will not only get away with the destruction of the world’s economy, they will retain the profits they made at our expense.  It’s just how our system works.

So, to the newly rejuvenated DOJ, I say, “Give ’em Hell!”

But for me, frankly, I feel a bit like poor Vladimir and Estragon, waiting endlessly for Godot.

 

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About a year ago, when it looked like the world was about to end and the economies of countries around the world were beginning to melt away like a Salvador Dali painting, the leaders of the U.S. government, i.e. President Bush and Treasury Secretary Paulson told us that we had only days, maybe only minutes, left to rescue those great bastions of Capitalism – the banks of Wall Street.  Everybody panicked. We couldn’t shovel money into the banks fast enough. If they died, we died – or so we were told anyway.

Today, the dust has settled, the banks are alive – having been given massive transfusions of life-giving money – and the people of America are left wondering: what just happened?  Here’s what happened: we were robbed by the banks.  After Lehman Brothers melted into a little puddle of red ink, there were reports that Goldman Sachs might be next.  Goldman Sachs!?!?  How could that be?  Isn’t Goldman the underlying sine qua non of American capitalism? If Goldman goes down won’t the entire country just dissolve? That’s what we were led to believe by Bush, Paulson, and their cronies.

So what happened? We (that means you and me, the American taxpayers) gave them a loan, called TARP, to keep them alive. We gave a lot of banks a lot of money because we were told we couldn’t survive without them.  They were “too big to fail”. Of course we didn’t give them our own cash, because we were also drowning in the melting economy – so we just printed the money and decided to let our descendants pay the government back through their tax bills over the coming centuries.

Here is where the big scam comes in: while Americans made a lot of stupid decisions buying houses they couldn’t afford at prices they couldn’t pay, the banks were equally – if not more – stupid because they gave us all those loans that we couldn’t pay back.  If the banks had the intelligence of a rock they would have realized that making such loans was pure folly.  They used to know that, but in their greed they put aside their knowledge as they chased the huge profits that can be made in a bubble economy.  So, what had happened was that we, the people, lost a bundle and so did the banks, but the banks got reimbursed for their losses – by us! But nobody reimbursed us! So now, not only do we owe the money we foolishly invested in overpriced houses, we are also on the hook for all the TARP money we printed because a lot of that will never be paid back.

Meanwhile, the bailed out banks – the ones we can’t live without, the ones that are too big to fail because our Capitalist economy depends on them – don’t want to play Capitalism anymore. They don’t want to lend money anymore. Instead they are hogging all their TARP money, refusing to lend money to people who need money for many purposes. In other words the big hog banks aren’t really functioning as banks anymore, which leads one to wonder why we thought they were too big to fail. In a sense they have already failed.  If they aren’t lending then they have failed in the principal purpose of a capitalist bank – making capital available. So if they have failed in their role, and yet, here we are, still alive and functioning, doesn’t that mean that they really weren’t “too big to fail” after all?  Aren’t the big hog banks proving every day that we really don’t need them after all? Isn’t this the big lie of Bush and Paulson?  Isn’t this the big lie of Wall Street?

One of the great drags on our economy now is the lack of available capital to restart businesses.  If we had simply nationalized the banks we would now have government-run banks that would be in the business of lending money to us because we would be the owners of the banks! They would sort of be like giant credit unions.  Instead, we have the Boss Hogs of Wall Street sitting on 200 billion dollars of TARP money, unwilling to do that for which we bailed them out.  The TARP bailout didn’t rescue the economy – the money we gave to the banks is still sitting in the banks, so how could it have any effect on the economy? The only thing TARP did was prove one thing: the whole Too Big To Fail story was nothing but a Big Bank Lie that only passed on the losses of the big banks to the American people.  We were duped. We were done a huge disservice by former President George Bush and former Treasury Secretary Hank Paulson, and we will be paying the price for this for generations to come.

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It was Albert Einstein who said that the definition of insanity is, “doing the same thing over and over again and expecting different results”. Congress has now passed legislation that will extend the first time home buyer tax credit deal – that’s the one that encourages people to buy a house now so they can pocket an $8,000 tax credit. Now, even better, Congress has also included in the legislation a $6500 tax credit for people who have owned their homes for five years.  The deal is you have to flip the house you are in and buy another house.  Then you have to stay in that house for three years.  This income tax credit is, of course, in addition to the exclusion from income taxes of up to half a million dollars profit you make on the sale of your existing house.

So, let me see if I understand this. The economy of the entire world has been brought to its knees by a housing bubble and the fix for the global economic meltdown is to create another housing bubble?  Is that it? You mean it’s like giving heroin addicts a little more heroin because they are having withdrawal symptoms? So when the symptoms go away everything is OK?  So what about those of us who bought a house four years ago? Why can’t we play too? Or what about those of us who are saving up for a down payment for our first home but we know we’ll never have enough until the summer? What about us?

So – this is going to help the economy, right? OK. Whose economy does it help? The people who buy the new houses? Probably not much, after all they are about to be saddled with a new mortgage.  How about the people who build the houses? I suppose so. It will probably keep them employed for another six months or so while they build the new houses for the new bubble. How about the banks? Well then, I think now we’ve struck pay dirt.  The banks will be giving out their usual, or unusual, 30 year mortgages, thus assuring themselves of at least tripling their investment over time.  Sure, this tax credit sort of stimulus will give a multi-million dollar boost to the home construction industry. However, over the period of 30 years, it will create a multi-billion dollar boost for the banks.

So where does that leave us? Congress is making rules that primarily benefit the big banks and a little bit of the money trickles down to the ordinary people, who will naturally wind up paying for this benefit to the banks via their shiny new mortgage payments – or via their future taxes which will be used to pay for the tax credits they just received.  In the end the net big time winner is the banks – which is probably the intent of our Congress which has grown fat and bloated, feasting upon the “contributions” from the half a zillion lobbyists who troll the streets and alleyways of our nation’s Capital.

Here’s a question: how many professional economists has our Congress consulted for guidance about this? Has Congress ever talked to Nouriel Roubini, the economist who accurately predicted the worldwide economic meltdown? Has President Obama ever talked to him? How about Paul Krugman, the Nobel prize-winning economist? Is he in the loop?  Somehow, I don’t think so. We all know who is in the loop in Washington. It’s the bankers and their lobbyists.  It’s the insurance companies and their lobbyists. As they say – we have the best government money can buy.

Here’s another question: what is the grand vision? Where do we go from here – economically, I mean. And how do we get there? Could someone in DC just stand up, preferably the President, and just lay it out for all of us? Or do they just think it is all too complicated for us children?  Is that why they are throwing us these scraps of cake to feed on – little stimuli to keep us sated while they figure out how to get the banks on top again?

OK, one more question: if our Congress cared so much about us instead of caring about the wealthy bankers, why don’t they put a limit – a hard and low limit – on credit card interest. Something like 12%.  Why don’t they put a hard limit on mortgage interest rates – like maybe 8%?  Why doesn’t the Congress protect us citizens from the raptors at the banks instead of allowing them to feed off the flesh of the American people? We know why.  The banks own Congress.  That’s why we now embarking on Housing Bubble Part 2.

Better find a seat in a lifeboat now.

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With the ratification of the Lisbon Treaty, the handwriting on the wall is now becoming legible.  The structure of the world’s national governments will be changing in the near future. This change is inevitable and simply follows the lead of businesses in becoming multinational organizations.  Many American businesses are now multinational and they use their new multinational identity to make handsome profits at the expense of the American citizen. Multinationals export the jobs of U.S. citizens to countries where the labor is much cheaper than American labor and then import their products, often with the same brand name they used when they were American made, and sell these to U.S. citizens. Meanwhile, U.S. citizens are unable to follow their former jobs overseas and these people often have to settle for a lower paying job than the one they had before.  It works great for business, but not so good for the average person – even though they think they are getting a great deal at Wal-Mart, people don’t realize that stores that primarily sell products that are made in other countries endanger purely American companies.

The European Union is a very powerful force in the world’s economy.  It’s currency, the Euro, is rapidly becoming the world’s dominant currency, while the dollar continually weakens in value.  In many ways, the EU is the United States of Europe, although many Europeans would hasten to deny that. The simple fact is that it is an alliance of twenty-seven countries that functions as a superstate.  Citizens of the EU can travel from one country to another as easily as Americans can travel from Texas to Connecticut. EU citizens can move, go to school, get a job, get medical care, and so forth in any EU country of their choosing. They just have to get up and go.

The result is that if there is job growth in Germany people go to Germany from Poland and work there.  If German jobs are exported to Ireland, then Germans are free to go to Ireland and apply for their old jobs.  How many Americans can go to China and get their job back? How many Americans can go to Canada and get free medical care?

The people of Europe have learned that small, individual countries don’t have much leverage in the modern world. To counter this they have created, and now significantly strengthened, the European superstate. Other countries, like Turkey, are clamoring to join.  It doesn’t take a genius to see where this is all heading. The leaders of twelve Asian countries recently met to discuss the possibility of creating an East Asian Union, modeled on the European Union. The idea has strong support from Japan.  The age of independent countries acting as separate economies is over.  It is very apparent that the economic success of the European Union is the model of the future, but is it the model for America?

Perhaps not. Not soon anyway. There will be resistance in America to create a North American Union or an American Union, encompassing North and South America, because American businesses are doing too well exploiting the cheap labor in remote countries, by exporting American jobs to those countries, and by selling their products to Americans. Of course these businesses don’t care that Americans have been using their credit cards to pay for all this and then they have been paying their credit card bills by buying and flipping houses in the great real estate Ponzi scheme.

Inevitably, in fact it is happening now, the U.S. economy has to suffer. Americans have to lose their jobs. We cannot compete with mega-countries like the EU and the East Asian Union.  The only course of action for the U.S. is to unite (you would think we would embrace that idea since that is the principle idea of the United States).  But this idea meets with a lot of resistance in the U.S. Most likely this is from the businessmen who are profiting from the current multinational thing and don’t see any profit for them in this new structure.  Nevertheless, it is inevitable.  It is the way the world is going. We can either become part of the movement or be swept away by it.

This natural process of combining small countries into larger mega-countries is part of a process that will inevitably lead to a single world community with a single, federal government and lots of local governments.  This is where world economic pressures are driving us.  This is the way political pressures are driving us. The U.S. has been slow to recognize the dominance of the EU as a financial and political power.  It appears that the U.S. is unaware of the desire for an East Asian Union.  Perhaps it is time for the sleeping giant to wake up from its slumber, before we find out that the rest of the world has grown far larger than us, and we have become nothing more than a sleeping midget.

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There have been many articles and books written about the cause of the Stock Market Crash of 1929.  As in many manmade disasters it can be difficult to determine THE CAUSE because there are in fact multiple causes which combine to generate the eventual catastrophe. Many so-called experts like to point to one cause or another for an event, when in actuality, the whole thing was due to a complex interrelationship of factors, none of which is the sole cause or the sine qua non.  There is, however, one thing that is certain about the events that led up to the 1929 disaster – the stock market was being manipulated. At the time there was no law against manipulating the market and small groups of very wealthy people did just that.

The wealthy investors would, as a group, begin buying shares of a single stock and then, through their connections in the news media, the average person would be told that such and such stock was rapidly going up and it looked like a sure bet. Before long a lot of small investors would buy the stock and its price would shoot further upward, thus luring even more small investors to buy in. The big boys would sit on the sideline and watch, waiting for their moment.  Then, in one coordinated movement they would sell all their shares at a hefty profit. The stock price would then plummet and the small investor, who fell for the fake news stories about the stock would lose a lot of money, maybe 90% or more.

It was practices like this that caused the Crash and the resulting Great Depression. President Roosevelt created the SEC in order to put an end to these predatory practices.  Law were passed.  Restrictions put in place. These sorts of schemes must never happen again, everyone said.  It is now 80 years since the great stock market crash.  During the intervening years laws have been changed.  The SEC has fallen asleep at the wheel. Men like Bernie Madoff have prospered. One can only wonder, have some of the old schemes been revived?  Have new ones been created? Is the stock market a straight and honest place where stocks are bought and sold without manipulation of any sort?

Consider the past several months behavior of the DOW.  There is a curious behavior in the prices of this average. Notice how the DOW tends to increase rather gradually and then periodically drops precipitously.  It’s sort of a sawtooth effect. One would expect that if very large groups of investors were buying and selling throughout the day that periodic, abrupt changes in stock prices wouldn’t happen. It seems highly unlikely that everyone would decide to sell at the same time. If they did, wouldn’t they also decide to buy that way?

Today the stock market has taken a steep drop.  Yesterday it took a steep rise. The pundits at the various news media all claim to have an explanation as to why the rise and drop occur.  The Wall Street Journal quoted one doomsayer who claims that we are headed for a disaster in commercial real estate.  Yet, only a few days ago we were exuberantly buying stock and congratulating ourselves that we have finally broken the 10,000 mark. We just heard that the economy has returned to positive economic growth.  Despite this wonderful news, CNN posts an article questioning whether things are getting better. Better? Isn’t 10,000 better than 6,500?

While the media are currently broadcasting a message of fear – which can only drive people to sell off their stocks – Nouriel Roubini, the economist who correctly predicted the world economic meltdown doesn’t seem too afraid. He is no longer talking about a W-shaped recovery and seems to have accepted a V-shaped recovery.  Mr. Roubini, seems more concerned about the Carry Trade, trading in currency, and its effect on the dollar’s value than anything else. He says we are now in the Mother of All Carry Trades.  Even so, the Fed has control of this through interest rates. Dr. Doom is no longer forecasting imminent doom for the world.  However, as before the great meltdown, his views don’t get much publicity. He says that the government’s intervention in the economy has led to a recovery. Yet, for many people there is skittishness and resulting volatility in the market – a perfect environment for predators to take advantage of the little investors who will jump to buy at news that a certain stock will rise and who will equally bail out immediately with the slightest hint that a particular stock might drop.

Listen to the so-called analysts who profess to know the cause of the stock market either rising or falling.  How often are they actually correct? There are many times when their reasons contradict their story from just yesterday.  One can only wonder whether there is more to this than meets the eye. The behavior of stocks, the pattern of steady rise and precipitous drops, both during a single day and over multiple days, might well indicate manipulation by large investors. Of course, it might not.  After all, sometimes you can flip a coin and it actually will come up heads ten times in a row.

But you have to wonder.

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