Manipulated Markets Make a Come Back

Does it make sense that during the deepest depression since 1929, the U.S. Stock Market comes back up from a 6oo+ point decline? Only a manipulated system where speculators have complete control could recover from a rout that showed how little confidence investors have in the market today.

by Luis R. Miranda
The Real Agenda
August 9, 2011

While countries are in dire straits to make payments on mostly illegally acquired debts and the price of oil continues to fall; while little to nothing is produced or manufactured in the industrialized world and no ingenuity makes it big anywhere in the world; while the most important currencies continue to tumble and other financial markets turn more sour; while unemployment continues to grow from the low 20′s and more people make use of food stamps and unemployment benefits; while more jobs are exported to third world nations that support slave work for their populations and inflation is only tamed by artificial manipulation of the currencies; while numerous people look to gold and silver as their salvation, surprisingly the stock market came back from the pantheon and surged to recover from the slide seen just a few hours ago.

There is very little that can't be done when someone or something controls fiat currencies, rating agencies, and financial markets.

But not only did the stocks came back strong; they had the largest gains in more than two years. Along with this “come back” the U.S. dollar got weaker and the Swiss franc rose the most since 1971. Even the very same Standard & Poor Index managed to recover almost 5 percent, the most significant gains since 2009. In the meantime, the origin of the financial disaster, the privately owned banks headed by the Federal Reserve announced their intent to print more worthless money into the economy as a way to “boost” confidence. Even though QE1 and QE2 failed to provide any confidence, or for that matter failed to provide anything positive, the FED believes it is appropriate to bring up QE3. With this, the FED shows its interest to purchase more government bonds, which will consolidate its position as the largest holder of U.S. government debt.

“The Fed is clearly setting up a situation that could offer them the potential to do something significant, if necessary,” Bruce McCain, who helps oversee $22 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “That could be viewed as a positive,” added McCain. “People are starting to realize that what we’ve had in the market was an overreaction.” Really? Positive? How so?

Artificial Surge after the Decline

How can a stock market come back from a 600+ point decline in just a few hours if one considers that the cause of such loss -the downgrade of the U.S. debt rating- has not been dealt with? It simply boggles the mind, doesn’t it? The United States credit rating was lowered from AAA to AA+ by Standard & Poors, a rating agency that is paid by the banks to evaluate financial products and which is in part responsible for the current financial catastrophe. Together with Moody’s, S&P was created the by the banking system to carry out “independent” evaluations of financial products as well as credit confidence on institutions, state and local governments and of course whole nations.

According to Bloomberg, Stocks came back from a loss of $ 1 trillion after S&P downgraded the U.S. credit rating last Friday evening. The results of the downgrade were not felt until Monday, when the Markets opened all over the world. The S&P index sank about 11 percent and the stock market lost 648 points or more than 6 percent. But just 24 hours later, everything was different. “The MSCI All-Country World Index rose 2.1 percent for its biggest gain of the year”, says Bloomberg. “The index started the U.S. session valued at about 12.1 times profits, down from 21 in 1995..The MSCI Emerging Markets Index pared today’s drop to 2.2 percent after tumbling as much as 4.4 percent.”

Stocks Rally? What Rally?

In the Stock Market, the Dow Jones climbed almost 430 or 4 percent, failing to completely recover from the recent loss. The stocks experienced the 1oth more significant gain in its history. Can you believe it? In the middle of a Depression, the stocks rally the much?

Meanwhile, in the S&P, shares got to the front of the line due to the numerically significant gains. In total, they accumulated some 8.2 percent all together. This is the biggest rally since May 2009, which meant a complete recovery from Monday’s low. Bank of America Corp., which is now being sued by AIG for fraud, managed to gain 17 percent while other players like Hartford Financial Services got back 16 percent.

Of course the main stream media is giving all credit to the Federal Reserve, due to its announcement that it intends to “boost” the economy by injecting worthless cash into it. The FED’s head, Ben Bernanke and his aides came out to try to calm the demise a bit, although not everyone at the FED agreed with the move to bring along a new quantitative easing move. Three members from the policy committee dissented and instead called for maintaining interest rates low for a longer period of time.

As the docu-film “The Inside Job” impeccably exposes, there is very little that can’t be done when someone or something has the power to create money out of thin air, create rating agencies, control those agencies to give AAA ratings to whatever they choose and electronically manipulate the financial stock and bond markets whenever it’s convenient in order to perpetuate the fraudulent debt-based system the world has worked under since 1913.

False Policy Changes

The best way to perpetuate the above cited financial system is to have the available tool continuously reinforce the falsehood of the Central Bank sponsored plans. So, Moody’s has come out to praise the FED’s move to maintain the interest rates at a quarter of a percent in order to bolster the downturn. It’s a  ”major policy change,” said Augustine Faucher, director of macroeconomics at Moody’s. “By providing a more explicit time line for raising rates, the Fed is telling markets it is concerned about recent economic weakness and the potential for a near-term contraction, and is dedicated to spurring stronger economic growth,” Faucher added.

Just as this statement by Faucher is baseless, so is the belief that because the U.S. dollar is the world’s reserve currency, it can stand more beating than any other one. In fact, one of the reasons why the U.S. has not been downgraded further is that its currency is still consider valuable. Ironically, the dollar has lost 98 percent of its value since it became the subject of manipulation by the bankers. Moody’s has stated that the U.S. dollar can support larger levels of debt than other currencies. How do they figure that with a currency that is so devalued. They can’t figure it out. They just make it up.

The one world reserve currency scheme is only beneficial to those who control it, because the rest of the nations need to do business while devaluing their own. In sound economics, the value of paper money is based on a country’s production or manufacturing, therefore, the U.S. dollar can no longer be such reserve currency. U.S. manufacturing has eroded so badly, that it has cost the jobs of some 18 million people in the last few years.

If the U.S. dollar is still the world’s reserve currency, why are there other currencies that have better exchange rates than the dollar itself? I am no economic expert, but if the Swiss Frank rates higher than the dollar in currency exchange markets, shouldn’t the Frank be the reserve currency? Or even better, shouldn’t a commodity like gold be the reserve currency given its capacity to withstand recessions, depressions and financial market manipulations? It should. The reason why gold is not the reserve currency or at least the commodity over which a paper money currency is supported is that bankers cannot monopolize it, “hug” it or manipulate it.

High Market but Low Results: The World Economy in Shambles

While the banks try to extend the suffering period for the middle and low classes, countries in Europe are scrambling for a life boat to jump on. Although France and Germany are said to be negotiating an agreement to buy Spain’s and Italy’s debt in order to avoid a deeper economic collapse, some sources claim that the rescuers believe the Italian debt is too large to save. Both Nicolas Sarkozy and Angela Merkel began to hear opposition voices that are calling for a different position from the German and French governments. The reason for this is that an eventual bailout of Italy and Spain could cost the rescuers their AAA rating. This is seen as a possible trigger to drag the world’s economy further into the precipice.

Although U.S. markets artificially revived themselves on Tuesday, other countries were not as lucky. In Italy, the bond market saw a loss of 11 percent on its 10 year note. Just as the FED has done in the United States, the European Central Bank kept Italy and Spain afloat through the purchase of their bonds for a second day in a row. That was not enough to save the Spanish 10 year notes, as they collapsed eight basis points to 5.08 percent on Tuesday.

Meanwhile, oil prices hit some of the lowest levels for the year by getting down to $79.30 a barrel. Conversely, gold prices soared and added 4.1 percent to get to a record price of $1,782.50 an ounce.

Germany and France to Lose AAA Rating

Reuters
August 9, 2011

PARIS/LONDON – France and Britain are most vulnerable within Europe to a rating review following the U.S. downgrade, with anemic growth and hefty borrowing placing them among the shakiest of the world’s triple-A rated lenders.

Both countries have stable rating outlooks, making a sudden downgrade unlikely and markets have been so impressed by Britain’s debt-cutting strategy that they have pushed its bond yields to record lows.

But a surge in the cost of insuring French debt against default on Monday highlighted alarm sparked by Friday’s U.S. rating cut as banks and brokerages warned that rating agencies could now have top-rated European lenders in their sights.

“France has slipped into borderline AA+/Aa1/AA+ (one notch below AAA) territory, so risks to its AAA are rising as stresses spread,” financial services firm BBH said in a note to clients.

In another indication of mounting concern over France, spreads between French and German 10-year bond yields hit all-time highs last week and remained wide on Monday.

The most likely trigger for France to be put on negative watch would be a failure by the government to get parliamentary backing for a constitutional limit on future public deficits, with opposition left-wing lawmakers vowing to reject it.

Euro zone outsider Britain looks less vulnerable, having its own currency which could slide in value and its own interest rate, but it could also come under review given its weaker economic fundamentals.

“There are … lots of countries in Europe that should be downgraded just as the U.S. has been downgraded,” U.S. investor Jim Rogers, co-founder of the Quantum Fund, told Reuters Insider as world leaders battled to calm a market rout driven by concern about U.S. and European debt levels.

After making history by stripping America of its AAA-rating, Standard and Poor’s reaffirmed France’s top-notch status and stable outlook at the weekend. Moody’s and Fitch declined to comment, but neither has given any indication they could change their outlooks on the United States, France or Britain.

Providing further comfort, fund managers poured into French and British bonds in early trading as Friday’s U.S. downgrade forced them to shift funds out of U.S. treasuries.

However, French five-year credit default swaps (CDS) surged 15.5 basis points on the day to a record-high 160 bps, according to data monitor Markit, taking it closer to the level of AA-rated states such as Belgium, though analysts warned the market often overreacts.

“The CDS market is very dysfunctional,” said Mark Schofield, global head of interest rate strategy at Citi.

“Although France from the perspective of fiscal fundamentals looks the weakest of the triple-A issuers in Europe, I still think that given very low levels of yields, the depth of the domestic market, the ability to continue to fund at low levels, it’s unlikely France will be downgraded in the near future.”

As for Britain, he added: “It’s unlikely that the UK will be downgraded. At this point in time, we’ve seen very significant fiscal tightening put in place.”

FRENCH POLITICS IN FOCUS

In the euro zone, only Austria, Finland, France, Germany, Luxembourg and the Netherlands have a triple-A rating, and French debt costs the most to insure.

France also has the highest deficit, debt and primary deficit of any of them and it is the only triple-A euro zone country running a current account deficit.

Its debt to GDP ratio — set to hit 86.9 percent next year and described by the national audit office as nearing the danger zone — could be pushed even higher by France’s contribution to a new Greece bailout.

S&P said in June it would probably downgrade France in the long term without further reforms and that to preserve its AAA rating France must balance its budget in the next five years, something not achieved since 1974.

It could re-examine its rating outlook as soon as the autumn if President Nicolas Sarkozy fails to win backing for his constitutional budget-balancing rule. Winning would require a three-fifths majority in a two-chamber parliamentary vote and the opposition Socialist Party has vowed to vote against.

“It would be a call for action,” for ratings agencies, said Deutsche Bank analyst Gilles Moec.

He said France was “intrinsically in a better situation” than the United States and could stave off a downgrade by accelerating deficit cuts, one idea being to raise value-added taxes and trim social contributions on labor.

Also weighing on France is a possible swing to a left-wing government after a presidential election next April. The Socialists have vowed to tinker, if they win, with a 2010 retirement reform aimed at cutting future pension costs.

WEAK GROWTH UK’S MAIN RISK

Britain has an even bigger deficit, primary deficit and debt to GDP ratio than France, and also runs a current account deficit but weak growth — and the damaging effect that would have on its debt pile — is its main threat.

Moody’s warned in June that it could reconsider its stance on Britain in the event of lower growth combined with weak fiscal consolidation.

Citi’s Schofield agreed, saying: “The big risks would be a very sharp slowdown in growth and/or huge political upheavals, if you started to get a breakdown in the coalition.”

Broadly, however, markets have faith in Britain’s ability to pay back its debt, despite a budget deficit of some 10 percent, because of an austerity plan that includes tax increases and unprecedented cuts in public spending.

Yields on 10-year gilts hit a record low of 2.59 percent last week and British debt continued to outperform European debt on Monday as investors looked for safe havens.

Yet, the economy has basically stalled over the last nine months and even the government’s fiscal watchdog, the Office for Budget Responsibility, has acknowledged its growth forecast of 1.7 percent for 2011 looks too high.

Lower growth means lower tax receipts and maybe a higher welfare bill if unemployment rises, all of which will add to debt.

The opposition has called for emergency tax cuts and some observers were quick to blame riots in London over the weekend on public spending cuts and dire economic prospects.

“Notwithstanding the fact that the UK is still struggling with its own economic recovery, we are pretty confident that the coalition is going to hold in the UK,” David Beers, head of Standard & Poor’s sovereign ratings, told Reuters Insider.

Super Congress A Gift to K Street

by Rep. Ron Paul

The Super Congress created by the recent debt ceiling increase deal is a typical example of something nefarious attached to a bigger bill that is rushed through Congress without giving Members ample opportunity to consider the full ramifications.  This commission may turn into an early Christmas present for the well-heeled lobbyists of K Street.  This is because the commission presents a huge opportunity for lobbying firms to sneak their client’s pet projects and issues into whatever legislation is created by the commission.   The fact that automatic cuts to defense are named if the committee deadlocks simply signals to the military industrial complex to bring their A game to the lobbying effort.

One red flag I am constantly aware of in my position as a Congressman is that highly complex and convoluted legislation frequently has dangerous provisions hidden in the fine print.  Elaborate legislative packages force lawmakers to take the bad with the good, and often if they refuse, they are accused of voting against the positive provision – never mind the blatant Constitutional violations in the bill, the spending, the waste, and the unchecked expansion of government.  I don’t usually have to read too much of a bill like that before encountering something unconstitutional, or simply unwise.  Then I have to vote no.

That doesn’t seem to be the case with a majority of legislators, unfortunately.  In order to ram through one special interest’s favorable treatment or giveaway, a certain amount of horse-trading is done.  The end result is mammoth bills with myriads of unrelated provisions that favor those with the best lobbyists at the expense of everyone else.

The creation of a 12 member committee to preside over $1.5 trillion in spending decisions, and the exclusion of the rest of Congress also means lobbying firms can focus their efforts on an anointed few, which is certainly more manageable for them than having to deal with the entire Congress.  Every cut considered will, of course, have a recipient on the other end whose livelihood is being threatened.  The probable outcome is that any cuts realized will be more a function of lobbying prowess than the merits or demerits of the actual programs on the chopping block.

Make no mistake – I am enthusiastically for cutting government spending.   The goal should be to eventually reduce government down to the size and scope of its constitutional limitations.  However, the process of getting there must also be constitutional.  Concentrating such special authority to fast track legislation affecting so many special interests to a small, select committee is nothing more than an unprecedented power grab.  Only fears of an impending catastrophe could have motivated Members to allow this legislation to be rushed through Congress.  The founding fathers had strong feelings about taxation without representation and under no circumstances would they have felt excluding 98% of Congress from fiscal decisions was appropriate.

I see nothing good coming out of this Super Congress.  I suspect it will be highly vulnerable to corruption and special interests.  No benefit can come from such careless disregard of the Founders’ design.

U.S. Stock Market Slides after Downgrade

by Stan Choe
AP
August 8, 2011

NEW YORK (AP) — U.S. stocks tumbled amid a rout in global markets Monday after Standard & Poor’s downgraded the U.S. credit rating for the first time.

S&P cut the long-term debt rating for the U.S. by one notch to AA+ from AAA late Friday. The move wasn’t unexpected, but it comes when investors are already feeling nervous about a weak U.S. economy, European debt problems and Japan’s recovery from its March earthquake.

The Dow Jones industrial average fell 151 points in morning trading, or 1.3 percent, to 11,300. The S&P 500 index fell 19 points, or 1.6 percent, to 1,180. The Nasdaq composite index fell 51 points, or 2 percent, to 2,481.

In Europe, the German DAX index fell 3 percent, and the French CAC 40 index fell 2.5 percent. In Asia, Japan’s Nikkei 225 index fell 2.2 percent, and the South Korean Kospi index fell 3.8 percent.

“Fear of a repeat of 2008 is what’s really driving investments,” said Gary Schlossberg, senior economist with Wells Capital Management. Memories of the 2008 financial crisis are driving investors away from risky investments and into what’s considered safer.

Prices for U.S. government debt rose because Treasurys are still seen as one of the world’s few safe havens. The yield on the 10-year Treasury note fell to 2.48 percent from 2.57 percent late Friday. It fell as low as 2.46 percent earlier Monday. A bond’s yield drops when its price rises.

But where Treasury prices are at the end of the day will be more important than where they are at the start, Bill O’Donnell, head of U.S. Treasury strategy at RBS Securities, wrote in a report.

“We will learn more about the future path of Treasury prices at today’s close than we will by the open,” he said. “I want to see how the market clears and how it synthesizes the cacophony of news of late.”

Gold is another investment that investors traditionally run to for safety. It rose above $1,700 per ounce for the first time. Its price remains below its 1980 record after adjusting for inflation.

Investors are worried that Spain or Italy could become the next European country to be unable to pay its debt. The European Central Bank said it will buy Italian and Spanish bonds in hopes of helping the countries avert a possible default.

Seeking to avert panic spreading across financial markets, the finance ministers and central bankers of the Group of 20 industrial and developing nations issued a joint statement Monday saying they were committed to taking all necessary measures to support financial stability and growth.

“We will remain in close contact throughout the coming weeks and cooperate as appropriate, ready to take action to ensure financial stability and liquidity in financial markets,” they said.

Crude oil, natural gas and other commodities fell on worries that a weaker global economy will mean less demand. Oil fell $2.84 to $84.04 per barrel.

Last week, the Dow Jones industrial average fell 698.63 points. That was its biggest point loss since October 2008, during the financial crisis. The Dow has dropped in nine of the last 11 trading days.

Worries about the U.S. economic recovery have been building since the government said that economic growth was far weaker in the first half of 2011 than economists expected. The economy grew at a 1.3 percent annual rate between April and June, below economists’ expectations of 1.7 percent. It expanded at just a 0.4 percent rate in the first quarter.

Then reports showed that the manufacturing and services industries barely grew in July. Job growth was better than economists expected last month. But the 117,000 jobs created in July were still well below the 215,000 that employers added between February and April, on average.

The Federal Reserve will meet on Tuesday, but economists don’t expect much to come out of the meeting. The central bank’s key interest rate is already at a record of nearly zero, where it has been since 2008. The Fed has also already said that it plans to keep rates low for “an extended period.”

The central bank finished a $600 billion program in June to buy Treasurys in hopes of supporting the economy. Chairman Ben Bernanke said last month that the Fed would step in to help the economy if it further weakened. But some Fed policymakers oppose more bond purchases, saying it could lead to higher inflation.

Fears about a weaker U.S. economy have overshadowed profit growth businesses have reported. Earnings rose 12 percent in the second quarter from a year earlier for the 441 companies in the S&P 500 that have already reported. Revenue growth has also topped 10 percent for the first time in a year.

United States Credit Rating Downgraded

S&P downgrades U.S. credit rating for first time

by Zachary A. Goldfarb
Washington Post
August 5, 2011

Standard & Poor’s announced Friday night that it has downgraded the sterling U.S. credit rating for the first time.

The move came even though the Treasury Department said that it had found a math error in the firm’s calculations of deficit projections, according to a person familiar with the matter.

S&P decided to lower the AAA rating, held by the United States for 70 years, to AA+ after a bipartisan debt deal signed into law this week failed to assuage concerns about the nation’s growing spending.

Analysts have said a downgrade could increase the cost of borrowing for the U.S. government and lead to tens of billions of dollars in more interest costs per year. That could translate into higher borrowing for consumers and businesses, too.

A downgrade would also have a cascading series of effects on states and localities that rely on federal funding, including in the Washington metro area, potentially raising the cost of borrowing for schools and parks.

But the exact impact of the downgrade won’t be known at least until Sunday night, when Asian markets open, and perhaps not fully grasped for months. Analysts say the immediate term impact is likely to be modest because the markets have been expecting a downgrade by S&P for weeks.

Standard & Poor’s has warned Washington several times this year that, unless the federal government took steps to tame its debt, its credit rating could be lowered.

Some analysts are worried about the impact of a downgrade on markets where Treasurys are held as collateral and the AAA rating is required. But most analysts don’t expect this issue to pose a major problem.

S&P’s action is the most tangible vote of disapproval so far by Wall Street on the deal between President Obama and Congress to cut the deficit by at least $2.1 trillion over 10 years. S&P has said that it wanted at least $4 trillion of deficit reduction.

The downgrade is likely to be used as a weapon by both Republicans and Democrats as they argue the other side has not taken deficit reduction seriously.

Other credit rating agencies — Moody’s Investors Service and Fitch Ratings — have decided not to downgrade the United States credit rating. But they’ve warned that, if the economy deteriorates significantly or the government does not take additional steps to tame the debt, they could move to downgrade too.

In April, S&P first said it might downgrade the U.S. credit rating on concerns that lawmakers would not be able to come to a deal on reducing the debt. In July, as efforts stagnated, S&P said the odds of a downgrade within three months had moved up to 50 percent.

The ultimate deal between Obama and Congress ultimately failed S&P’s benchmark. Obama administration officials have been critical of S&P for making what was essentially a political judgment and for failing to conclude that the country was making a strong first step to reducing its deficit.

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