The New York Federal Reserve Rescues the Stock Market (Again)

This is another in a series of articles outlining the New York Federal Reserve Bank’s policy to stabilize (artificially prop up) the stock market using Permanent Open Market Operations (POMO). The graphic below from CNNFN.com (2:15 PM, June 10th, 2011) shows another practical example of this policy:

The bars underneath the Dow Jones Industrial Average represent the volume of stock sales for a discrete period of time. About 1:30 PM, the market started to collapse and the Federal Reserve started buying stock. And then bought more stock to stabilize and actually artificially restore some of the day’s losses.

As China has announced today, the United States is defaulting on our debt. Honor and responsibility have been replaced by political expediency, greed and financial incompetence. Printing more money to shore up the market is just another means to redistribute your wealth and retirement savings. How long can the Federal Reserve direct the US Treasury to print money? As long as we let them.

David DeGerolamo

Related POMO articles

Don’t Ask, Don’t Tell – POMO Part II

Get Ready to Pay for the Federal Reserve’s Mistakes

Thank the Federal Reserve for POMO

      
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3 Responses to The New York Federal Reserve Rescues the Stock Market (Again)

  1. Frank says:

    Dave, I have to ask. At 1:30 what evidence did you have that the NY Fed trading desk was buying stocks? Did they buy individual stocks? Did they buy the index? How much did they spend? Was there public announcement of the intervention?

    PS. We are not defaulting on our debt, all interest payments and principle payments are being made. The Chinese ratings agency spokesmen was referring to the sell off in the dollar over the past couple of years. In any event, it doesn’t matter for China, they maintain a fixed exchange rate against the US dollar. For others, they all have the option of hedging their future currency exposure.

    • admin says:

      The volume of the stock purchases increasing as the market dropped is the basis for my inference. This pattern has been ongoing and documented by other outlets in the past. Of course, it is possible that institutional investors are buying in large volume as the market drops. I believe this is the sixth straight week of declines in the market so they may be figuring the market is oversold. Here is their account for yesterday: http://www.newyorkfed.org/markets/pomo/display/index.cfm?showmore=1

      Frank, I have to ask. Have you bought gold yet?

      • Frank says:

        Fed, stocks: if you look at a 3mth technical chart of the Dow, you’ll find that the point at which you felt the Fed intervened, 12,098, was buying in front of an important technical support level of 12,078 set back on March 21st.

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