Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What UK CPI, RPI INFLATION Forecasts for General Election Result 2019 - 11th Dec 19
Gold ETF Holdings Surge… But Do They Actually Hold Gold? - 11th Dec 19
Gold, Silver Reversals, Lower Prices and Our Precious Profits - 11th Dec 19
Opinion Pollsters, YouGov MRP General Election 2019 Result Seats Forecast - 11th Dec 19
UK General Election Tory and Labour Marginal Seats Analysis, Implied Forecast 2019 - 11th Dec 19
UK General Election 2019 - Tory Seats Forecast Based on GDP Growth - 11th Dec 19
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19

Market Oracle FREE Newsletter

UK General Election Forecast 2019

Price Rigging and Financial Corruption. A Global House Of Cards

Stock-Markets / Market Manipulation Nov 16, 2014 - 07:34 PM GMT

By: Paul_Craig_Roberts

Stock-Markets

As most Americans, if not the financial media, are aware, Quantitative Easing (a euphemism for printing money) has failed to bring back the US economy. 

So why has Japan adopted the policy?  Since the heavy duty money printing began in 2013, the Japanese yen has fallen 35% against the US dollar, a big cost for a country dependent on energy imports.  Moreover, the Japanese economy has shown no growth in response to the QE stimulus to justify the rising price of imports.


Despite the economy’s lack of response to the stimulus, last month the Bank of Japan announced a 60% increase in quantitative easing–from 50 to 80 trillion yen annually.

Albert Edwards, a strategist at Societe Generale, predicts that the Japanese printing press will drive the yen down from 115 yen to the dollar to 145.

This is a prediction, but why risk the reality? What does Japan have to gain from currency depreciation? What is the thinking behind the policy?

An easy explanation is that Japan is being ordered to destroy its currency in order to protect the over-printed US dollar.  As a vassal state, Japan suffers under US political and financial hegemony and is powerless to resist Washington’s pressure.

The official explanation is that, like the Federal Reserve, the Bank of Japan professes to believe in the Phillips Curve, which associates economic growth with inflation.  The supply-side economic policy implemented by the Reagan administration disproved the Phillips Curve belief that economic growth was inconsistent with a declining or a stable rate of inflation.  However, establishment economists refuse to take note and continue with the dogmas with which they are comfortable.

In the US QE caused inflation in stock and bond prices as most of the liquidity provided went into financial markets instead of into consumers’ pockets.  There is more consumer price inflation than the official inflation measures report, as the measures are designed to under-report inflation, thereby saving money on COLA adjustments, but the main effect of QE has been unrealistic stock and bond prices.

The Bank of Japan’s hopes are that raw material and energy import prices will rise as the exchange value of yen falls, and that these higher costs will be passed along in consumer prices, pushing up inflation and stimulating economic growth.  Japan is betting its economy on a discredited theory.

The interesting question is why financial strategists expect the yen to collapse under QE, but did not expect the dollar to collapse under QE.  Japan is the world’s third largest economy, and until about a decade ago was going gangbusters despite the yen rising in value. Why should QE affect the yen differently from the dollar?

Perhaps the answer lies in the very powerful alliance between the US government and the banking/financial sector and on the obligation that Washington imposes on its vassal states to support the dollar as world reserve currency.  Japan lacks the capability to neutralize normal economic forces.  Washington’s ability to rig markets has allowed Washington to keep its economic house of cards standing.

The Federal Reserve’s announcement that QE is terminated has improved the outlook for the US dollar.  However, as Nomi Prins makes clear, QE has not ended, merely morphed.

The Fed’s bond purchases have left the big banks with $2.6 trillion in excess cash reserves on deposit with the Fed.  The banks will now use this money to buy bonds in place of the Fed’s purchases.  When this money runs out, the Fed will find a reason to restart QE. Moreover, the Fed has announced that it intends to reinvest the interest and returning principle from its $4.5 trillion in holdings of mortgage backed instruments and Treasuries to continue purchasing bonds. Possibly also, interest rate swaps can be manipulated to keep rates down. So, despite the announced end of QE, purchases will continue to support high bond prices, and the high bond prices will continue to encourage purchases of stocks, thus perpetuating the house of cards.

As Dave Kranzler and I (and no doubt others) have pointed out, a stable or rising dollar exchange value is the necessary foundation to the house of cards.  Until three years ago, the dollar was losing ground rapidly with respect to gold.  Since that time massive sales of uncovered shorts in the gold futures market have been used to drive down the gold price.

That gold and silver bullion prices are rigged is obvious. Demand is high, and supply is constrained; yet prices are falling.  The US mint cannot keep up with the demand for silver eagles and has suspended sales. The Canadian mint is rationing the supply of silver maple leafs. Asian demand for gold, especially from China, is at record levels.

The third quarter, 2014, was the 15th consecutive quarter of net purchases of gold by central banks. Dave Kranzler reports that in the past eight months, 101 tonnes have been drained from GLD, an indication that there is a gold shortage for delivery to physical purchasers.  The declining futures price, which is established in a paper market where contracts are settled in cash, not in gold, is inconsistent with rising demand and constrained supply and is a clear indication of price rigging by authorities.

The extent of financial corruption involving collusion between the mega-banks and the financial authorities is unfathomable.  The Western financial system is a house of cards resting on corruption.

The house of cards has stood longer than I thought possible. Can it stand forever or are there so many rotted joints that some simultaneous collection of failures overwhelms the manipulation and brings on a massive crash?  Time will tell.

Paul Craig Roberts

http://www.paulcraigroberts.org/

Paul Craig Roberts [ email him ] was Assistant Secretary of the Treasury during President Reagan's first term.  He was Associate Editor of the Wall Street Journal .  He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider's Account of Policymaking in Washington ; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy , and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice . Click here for Peter Brimelow's Forbes Magazine interview with Roberts about the recent epidemic of prosecutorial misconduct.

© 2014 Copyright Paul Craig Roberts - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules