Are the Federal Reserve and Its Primary Dealer Banks Manipulating the Stock Market?

by Gary D. Barnett

Recently by Gary D. Barnett: Automated Killing: The Total Immorality of the U.S. Government and Its Military

The U.S. economy has continued to falter since the housing bubble burst. Virtually every part of the economy has worsened, and continues to do so. This is also true on a global scale. Whether discussing unemployment, housing, inflation, GDP, retail sales, etc., the picture is clear, we are still in a depression. Even though the economic picture is bleak, the stock markets have continued to go up in value during this period. Why is this happening?

After the market collapse of 2008 and 2009, where losses were generally around 55%, the markets have gone up substantially. During that same period were QE1 and QE2. This is no coincidence. Bernanke took full credit for the rise in the stock markets, and for good reason. The "Quantitative Easing" programs were structured to transfer money (out of thin air) from the New York Fed to its primary dealer banks. This is done when the Fed purchases treasury bonds from these dealers, some of which include Goldman Sachs and J.P. Morgan, along with 18 others. This process infuses the banks receiving this money with instant liquidity. During QE2 for example, from November 3rd of 2010 through June 30th of 2011, the New York Fed bought from its primary dealers $770 billion worth of treasuries, not the $600 billion it claimed. These banks acquired many of these treasuries during the bailouts by trading worthless securities for full value treasuries. This was, by the way, at taxpayer expense.

There is a direct correlation between these bond purchases and stock market performance. When QE1 ended, after an increase of approximately 90% in the markets, the markets began to fall.  After falling about 23% from those highs, QE2 was announced, and began in November of 2010. The markets proceeded to go up again until QE2 ended in June of 2011. After the money stopped flowing, there was a sudden drop of over 18% from July through September of this year.

Now it gets even more interesting. In just the past two weeks, the stock markets have gone up about 11%. During that same time frame, the Fed has purchased $39.9 billion of treasuries from its dealer banks, in the same manner as it did during QE1 and QE2. If continued, this is an $85 billion a month pace, similar to that of QE2. But remember, there is no announced QE3, and no report that I've seen has mentioned anything about this bond buying, but it is going on nonetheless.

The only survivor left standing in this economy seems to be the stock market. This performance should not be happening given the dire economic conditions we're in today. This tells me that when the money stops for good, and the markets crash, all else will follow. In my opinion, the New York Fed is doing everything possible to make sure that the markets remain somewhat stable, and it is taking a lot of money to keep up this sham. Every time the money starts flowing, the markets rise, and when the money stops flowing, the markets go down. There is now a clear pattern, and it is directly related to money pumping by the Fed, money that goes directly to its primary dealer banks. This allows the banks to make large trading profits running up the markets, and allows the government to point to the markets as a sign that things aren't so bad after all. This is a lie!

By going to this page of the New York Fed Permanent Open Market Operations, you can easily see how many purchases, and in what amounts, have taken place in just the past two weeks. Then compare what has happened in the stock markets over this same time frame. The same can be done for QE1 and QE2. This direct correlation is not accidental nor is it coincidental. Something is very wrong here, and the Federal Reserve is smack in the middle of this fraud.

The Federal Reserve System is not only destroying the value of our hard earned money, but it is involved in lies and manipulation, and is cloaked in secrecy. It is bailing out banks all over the world with fake money. The Federal Reserve is rotten to the core! How could any sane people allow one entity, a very corrupt one at that, to control the entire monetary system? That is a travesty, but it can be remedied. The Federal Reserve should be abolished immediately, and those running it should be prosecuted for their crimes! If it is not abolished, the value of our hard earned money will simply disappear into the dustbin of history, and most will be left with nothing!