Tuesday, February 18, 2014

Fed Taper, Market Manipulation, and Inflation of Bubbles

"The trouble with inflating asset bubbles is that you have to keep inflating them or they pop. Unfortunately for the bubble-blowing central banks, asset bubbles are a double-bind: you cannot inflate assets forever. At some unpredictable point, the risk and moral hazard that are part and parcel of all asset bubbles trigger an avalanche of selling that pops the bubble. This is another facet of the Fed’s Double-Bind: if you stop pumping asset bubbles, they pop as participants realize the music has stopped, and if you keep pumping them, they expand to super-nova criticality and implode. This is the super-nova nature of asset bubbles: if you try to deflate the bubble slowly, it pops, but if you keep inflating the bubble it eventually pops from its internal extremes".

"Fed Refusal to Taper is Good News for Gold Investors and Good news for Cheap Oil to continue".  If the Feds cut their bond purchases in half, interest rates would skyrocket and the stock market would come crashing down.

“The US Fed, the US Govt, and the Big US Banks urgently needed to stop the move in the 10-year bond yield (aka TNX). They needed to prevent a move above 3.0% on the US Treasury yield. They needed to avoid a calamity with both Interest Rate Swaps and UST Bond carry trade reversals. They needed to avoid a trigger of sell stops. They needed to prevent the rest of the world selling off UST Bonds within their reserves management systems, the foundation of their national banking systems. So the USFed and Big US Banks called upon themselves to place artificial high bids on UST Bonds sold among themselves in a circle jerk of Flash Trading. They pushed the TNX below 2.9% quickly in the corrupt process. US Fed Chairman Bernanke then backed off the Taper Talk threat, and the UST Bonds rushed in a pathetic rally. The Jackass forecasted his retreat exactly, a bluff after a failed trial balloon. The bankers then resorted to the hidden work of computer algorithms. They altered the constructive dynamics of the bond market. They corrupted it one deeper level. The Flash Trade defense is pathetic, and will be revealed in coming weeks.  The bond market has converted into a Flash Trading arena within the bank syndicate to maintain bond prices. This is an explosive development, indicative of unsustainable sovereign bond prices kept up by round robin marked by internal sales within the Federal Reserve banks themselves.  The UST Bond market is broken, and the US Dollar cannot be defended”.

No comments:

Post a Comment