Market Manipulation Goes Global (Are you prepared for a hubris driven downdraft?)

Mao cc

It hasn’t GONE global. Its long been global and on a massive scale. But China is freaking people out.

Play this game if you want. But understand that it is a game which is run by cronies, for cronies, and that cronies are very fallible. Can you handle the kind of downdraft which may come when reality catches up with the hubris of central bankers?

It’s an important question, and one which should be asked when things (in the USA) are still relatively calm.

(From Project-Syndicate)

Market manipulation has become standard operating procedure in policy circles around the world. All eyes are now on China’s attempts to cope with the collapse of a major equity bubble. But the efforts of Chinese authorities are hardly unique. The leading economies of the West are doing pretty much the same thing – just dressing up their manipulation in different clothes.

Take quantitative easing, first used in Japan in the early 2000s, then in the United States after 2008, then in Japan again beginning in 2013, and now in Europe. In all of these cases, QE essentially has been an aggressive effort to manipulate asset prices. It works primarily through direct central-bank purchases of long-dated sovereign securities, thereby reducing long-term interest rates, which, in turn, makes equities more attractive.

Click here for the article.

(Summer Vacation Edition)