MARKET MANIPULATION – PART OF THE OBAMA GAME PLAN??

[koraz]

As a long time market follower I am observing what is happening in the market with interest (and agony!). I have watched other downturns (2001, 1998, 1987) and read about others (1929). We all know that market panics are part factual and part psychological. In other panic periods, CNBC and other press outlets would roll out industry leaders such as Warren Buffett to calm the public. Where is the leadership today? Sure we have problems but remember the root of the problem – mortgages. Even if we recognize that banks made stupid loans, deadbeats took on mortgages that they had no intention on repaying, and property values were inflated, there is still a real asset with some value behind each of these mortgages. It is not like bubbles where they were selling air or tulips!

I ask myself why we are not hearing voices calling for calm. Do the powers that be want to see this crash? Or wait, I forgot which candidate they are supporting in this election. So, I starting search the internet for information on prior crashes. I came upon an interesting article written in November 1998 by Paul Krugman for the NYT around the time of the Asian Market Crisis. It is interesting food for thought. I am linking the entire article but I will post some highlights here (emphasis added):

“ . . . today's financial markets are so vast that it seems hard to believe that any individual or group could have the power to manipulate prices. When the occasional accusation of financial conspiracy is heard -- when, for example, Malaysia's Prime Minister blames the machinations of Jewish speculators for his country's problems -- the reaction of most observers is skepticism, even ridicule.”

“But even the paranoid have people out to get them. Little by little, over the past few years, the figure of the evil speculator has re-emerged. George Soros played a definite role -- though probably not a decisive one -- in the forced devaluation of Britain's pound sterling in 1992.”

“One answer is that deregulation and information technology have combined to make financial markets more ''liquid.'' That is, they have made buying and selling easier than ever before. As a consequence, aggressive speculators are able to leverage themselves -- to take bets far larger than their capital. Long-Term Capital Management -- the hedge fund whose de facto failure rocked markets a few weeks ago -- apparently leveraged a few billion dollars of its own money into more than a trillion dollars of assets. That's almost four times as large as the value of the whole Hong Kong stock market. Suddenly, the idea that a handful of big players could manipulate national financial markets doesn't look that implausible after all. “

“Perhaps most important, when economies rather than mere companies are at stake, speculation can sometimes be a self-fulfilling prophecy, producing a crisis that justifies the market's low opinion. If Hong Kong's currency and political system remain stable, stocks in its companies will be worth a lot. But if a run on the currency causes that stability to wobble, they will be worth much less. So, faced with a sufficiently large play against Hong Kong, those not part of the conspiracy may not rush in to buy cheap Hong Kong stocks; they may conclude that the play against the economy is on the verge of success, and sell all the faster. Or at least that's what Hong Kong's Government feared, and given the way this global financial crisis has spread, who can say with confidence that it is wrong? “

“Of course, maybe it doesn't matter what Donald Tsang or the public in general thinks; maybe the free movement of international capital is too important to restrict, and occasional manipulation of their markets is simply part of the price small countries must pay.”

So we know markets can be manipulated. Who would benefit from such manipulation today??

http://query.nytimes.com/gst/fullpage.html?res=9F0CE5DC113FF93BA35752C1A96E958260&sec=&spon=&pagewanted=1

[princess leah]

I remember how badly the market dipped after 9/11 - down to below 7,500 at one point? Problem is when our companies get taken over by foreign companies and just who owns them or is behind those companies? China, Venezuela, Iran? That’s where we need more oversight and prevention...

[Perdogg]

I am here, brother. I am the voice of reason.;)