How Much Does the Government Really Manipulate Markets?

August 20, 2007 - On Monday, October 23, 2006, reporter Deborah Solomon wrote in the Wall Street Journal:

“Mr. Paulson is chairman of the Working Group, which coordinates government policy on financial markets and includes the heads of the Federal Reserve, Securities and Exchange Commission, and Commodity Futures Trading Commission. Mr. Paulson has insisted that they meet about every six weeks. Before his arrival, the group met every few months and sometimes as infrequently as once a quarter.”

The Working Group on Financial Markets, consisting of the U.S. Secretary of Treasury, The Federal Reserve, the SEC, and the Commodity Futures Trading Commission, is also known in other circles as the Plunge Protection Team (PPT). The very existence of the Plunge Protection Team, and its supposed interference in stock markets, has been a hotly contested topic, with some people even doubting that it actually intervenes in markets altogether. The PPT has been accused of a widespread number of actions, from buying massive amounts of futures to prop up stock markets and prevent further panic during this recent correction to spurring Central Banks all over the world to release rumors about selling gold to artificially depress the price of gold and thus keep the dollar’s heartbeat, however feint, still alive. I for one, believe that it does exist and believe that it does manipulate markets to serve its own agenda. To what extent they manipulate markets is anybody’s guess however. If I had to guess, I would say it’s somewhat more than the disbelievers think but less than what the believers presuppose. Certainly we can conclude that the government is not forthright about its participation (or others may say, interference) in the markets. Read more …

2 comments August 20th, 2007