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Don't you just love how some things are named?
Like the Federal Reserve System, for instance. It's a central bank that was conceived in the private study of a private hunting lodge on a private island by a bunch of private bankers who didn't want to use the word "bank" in its name to fool taxpayers who thought it was a "system" to safeguard the public… from the very bankers who conceived it.
I don't know about you, but the feeling of safety I have is just overwhelming… NOT.
Then there's the Federal Open Market Committee (FOMC). That's a committee of top plotters that meets in private to discuss what's going on in "free" markets so they can figure out how to manipulate them.
The Open Market Committee, or the Old Boys Club (they have a woman on the committee, but she's just a token "dove" who plays "Follow the Beard"), meets today and Wednesday to check on how their manipulations have stopped unruly free markets from sinking the banks that secretly run the Fed (you know it's not a secret, but there are a whole lot of taxpayers who don't).
For some time now, far too long in fact, the Federal Open Market Committee has been buying a smallish $85 billion a month of various types of bonds to save the world and their masters.
They're buying $45 billion a month of government bonds to save the government from having to tax taxpayers to pay for government waste. And they're buying $40 billion a month of mortgage-backed securities (because they're so safety-minded they're only buying "agency-backed" mortgage bonds. Agency-backed? That means taxpayer-backed, which is why they're supposedly safe).
Who are they buying all those bonds from? Go on, take a guess…
Duh… the banks!
You see, in an open market where banks can do what they want, they can get in trouble (they own a lot of MBS stuff that's been sucking wind, which the Fed is kindly taking off their hands until it bounces back) because they are greedy you-know-whats. You wouldn't understand unless you've ever been caught in quicksand. But, because it's an open market, thank goodness, there's an Open Market Committee to throw them a rope (too bad it never lands around their necks, but whatever).
The job of the Open Market Committee is, as you have figured out by now, to manipulate open markets for the benefit of banks.
They tell us they're doing it to benefit the economy (which they helped to sink… don't you just love free markets?). They tell us they are buying bonds from banks to boost their bottom lines so they can knock down the unemployment rate.
What they are doing is manipulating open markets for the benefit of banks. Got it?
But, I digress.
The Federal Open Market Committee meets today and Wednesday. On Wednesday afternoon at 2:00 we get to hear what they want us to hear. And at 2:30, Bernanke talks to reporters to answer questions about how well the manipulation is going.
The Dow's up triple digits today (good thing there's no volatility in this market) on account of the latest speculation that because the market was down triple digits on Friday, the Fed is going to look at recent volatility and come out saying something that's supposed to calm volatile markets.
Don't be confused… even though you're supposed to be confused.
It will all be cleared up on Wednesday afternoon when the private deliberations of the Open Market Committee will be revealed.
There's nothing I love better than free markets! God Bless you, Adam Smith and "The Creature From Jekyll Island."
For more on how the Fed came to be the market manipulation machine it is today, check out: Do We Really Need the Federal Reserve System?
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
He helped develop what has become known as the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of 10X Trader, Shah presents his legion of subscribers with the chance to earn ten times their money on trade after trade.
Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps.
Shah is a frequent guest on CNBC, Forbes, and Marketwatch, and you can catch him every week on Fox Business's "Varney & Co."
He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.