Stock Market Rigged?
Craig Roberts, Dave Kranzler, and Michael Hudson
February 09, 2018 "Information
February 6 PCR
if the Plunge Protection Team had stepped in and
prevented a stock market correction by
purchasing equity index futures. Sure enough,
the daily exchange volume chart shows an
increase in futures activity on February 2 with
sharp increases on Feb. 5th and 6th. Those are
the days when the stock market averages were
experiencing large point drops. So, ask
yourself, would you purchase equity futures
while experiencing cumultive stock market drops?
One can understand shorting a dropping market,
but not buying futures.
this is what happened. Seeing the beginning of a
correction, the Plunge Protection Team placed a
futures bid just below the existing price.
Traders saw the bid, recognized that the
government was intervening to support the
market, and the bid was front-run with the hedge
fund algorithms automatically picking up the
the Federal Reserve with its unlimited ability
to create money would take the risk of buying
futures in the face of a falling market.
Moreover, such an infusion of money into the
market does not show up in the money supply
futures purchases prevented margin calls and
stop/loss orders in a heavily leveraged equity
market that would have collapsed the market.
are the pros and cons of this kind of
intervention (which might have occurred also in
May 2010 and August 2015)? By stopping a
correction, the intervention prevented a pension
fund collapse, both private and state. However,
by propping up over-valued equities that the
Federal Reserve’s quantitative easing created,
the intervention rewarded over-leveraged
speculative risk-taking and prevented price
discovery. We still have an equity market whose
values rest on record margin debt, stock
buy-backs, and prices pumped up by
money-printing. The problems waiting to come
home continue to build.
question is: can intervention prop-up
over-valued, problem-ridden markets forever?
Thursday's drop, we will see what happens today.
Dr. Paul Craig Roberts was Assistant Secretary of
the Treasury for Economic Policy and associate
editor of the Wall Street Journal. He was
columnist for Business Week, Scripps Howard News
Service, and Creators Syndicate. He has had many
university appointments. His internet columns
have attracted a worldwide following. Roberts'
latest books are
The Failure of Laissez Faire
Capitalism and Economic Dissolution of the West,
How America Was Lost,
The Neoconservative Threat to
views expressed in this article are solely those
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