|
Page 2 of 2
 The Exchange Stabilization Fund (ESF)
The 1934 Gold Reserve Act created the US Treasury's ESF. Section 7 of the 1944 Bretton Woods Agreements made its operations permanent. As originally established, the Treasury ran the Fund outside of congressional oversight "to keep sharp swings in the dollar's exchange rate from (disrupting) financial markets" through manipulation. Its operations now include stabilizing foreign currencies, extending credit lines to foreign governments, and last September to guaranteeing money market funds against losses for up to $50 billion. In 1995, the Clinton administration used the fund to provide Mexico a $20 billion credit line to stabilize the peso at a time of economic crisis, and earlier administrations extended loans or credit lines to China, Brazil, Ecuador, Iceland and Liberia. The Treasury's web site also states that: "By law, the Secretary has considerable discretion in the use of ESF resources. The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s....the Secretary (per) approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities." "....Treasury has often linked the availability of ESF financing to a borrower's use of the credit facilities of the IMF, both to support the IMF's role and to strengthen assurances that there will be timely repayment of ESF financing." Established in 1999 in the wake of the Long Term Capital Management (LTCM) crisis, it manipulates markets to benefit giant Wall Street firms and high-level insiders. According to one account, it was to curb future crises by: -- letting giant financial institutions collude through large-scale program trading to move markets up or down as they wish;
-- bailing out its members in financial trouble; and
-- manipulating markets short or longer-term with government approval at the expense of small investors none the wiser and often getting trampled. In fact, the "private sector" creates "financial shocks" to open markets, remove competition, and consolidate for greater power by buying damaged assets cheap. Financial history has numerous examples of preying on the weak, crushing competition, socializing risks, privatizing profits, redistributing wealth upward to a financial oligarchy, creating "tollbooth economies" in debt bondage according to Michael Hudson, and overall getting a "free lunch" at the public's expense. CRMPG explains financial excesses and crises this way: "At the end of the day, (their) root cause....on both the upside and the downside of the cycle is collective human behavior: unbridled optimism on the upside and fear on the downside, all in a setting in which it is literally impossible to anticipate when optimism gives rise to fear or fear gives rise to optimism...." "What is needed, therefore, is a form of private initiative that will complement official oversight in encouraging industry-wide practices that will help mitigate systemic risk. The recommendations of the Report have been framed with that objective in mind." Or as Orwell might have said: instability is stability, creating systemic risk is containing it, sloping playing fields are level ones, extracting the greatest profit is sharing it, and what benefits the few helps everyone. Michel Chossudovsky explains that: "triggering market collapse(s) can be a very profitable undertaking. (Evidence suggests) that the Security and Exchange Commission (SEC) regulators have created an environment which supports speculative transactions (through) futures, options, index funds, derivative securities (and short-selling), etc. (that) make money when the stock market crumbles....foreknowledge and inside information (create golden profit opportunities for) powerful speculators" able to move markets up or down with the public none the wiser. As a result, concentrated wealth and "financial power resulting from market manipulation is unprecedented" with small investors' savings, IRAs, pensions, 401ks, and futures being decimated from it. Deconstructing So-Called "Green Shoots" Daily the corporate media trumpet them to lull the unwary into believing the global economic crisis is ebbing and recovery is on the way. Not according to longtime market analyst Bob Chapman who calls green shoots "Poison Ivy" and economist Nouriel Roubini saying they're "yellow weeds" at a time there's lots more pain ahead. For many months and in a recent commentary he refers to "the worst financial crisis, economic crisis and recession since the Great Depression....the consensus is now becoming optimistic again and says that we are going to go from minus 6 percent growth to positive growth in the second half of the year....my views are much more bearish....The problems of the financial system are severe. Many banks are still insolvent." We're "piling public debt on top of private debt to socialize the losses; and at some point the back of (the) government('s) balance sheet is going to break, and if that happens, it's going to be a disaster." Short of that, he, Chapman, and others see the risks going forward as daunting. As for the recent stock market rise, they both call it a "sucker's rally" that will reverse as the US economy keeps contracting and the financial system suffers unexpected or manipulated shocks. Highly respected market analyst Louise Yamada agrees. As Randall Forsyth reported in the May 25 issue of Barron's Up and Down Wall Street column: "It is almost uncanny the degree to which 2002-08 has tracked 1932-38, 'Yamada writes in her latest note to clients.' " -- "the dot-com collapse parallels the Great Crash and its aftermath," followed by the 2003-07 recovery, similar to 1933-37;
-- then the late 2008 - early March 2009 collapse tracks a similar 1937-38 trajectory, after which a strong rally followed much like today;
-- then in November 1938, the market dropped 22% followed by a 26% rise and a series of further ups and downs - down 28%, up 23%, down 16%, up 13%, and a final 29% decline ending in 1942;
-- from the 1938 high ("analogous to where we are now," she says), stock prices fell 41% to a final bottom. She says structural bear markets typically last 13 - 16 years so this one has a long way to go before "complet(ing) the repair process." She calls the current rebound "a bungee jump," very typical of bear markets. Numerous ones occurred during the Great Depression, 8 alone from 1929 - 1932, some deceptively strong. Expect market manipulators today to produce similar price action going forward - to enrich themselves while trampling on the unwary, well-advised to protect their dollars from becoming quarters or dimes.
|
Stephen Lendman, a contributing editor to MWC News, is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen[at]sbcglobal.net.
Also listen to The Global Research News Hour on RepublicBroadcasting.org Monday through Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.
other articles by this author: http://mwcnews.net/StephenLendman |
|
This_Category |
|
Category:: Bulletin |
Recommend this article...
 Quote this article on your site | Views: 792
Powered by AkoComment Tweaked Special Edition v.1.4.4
Tags: Stephen Lendman Manipulation Markets Wall Street
|
Commentary 
