One Nation Under the Fed

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As we look at the state of the economy today…

And the wild swings that have become “normal” in the stock market as investors continue to pull their money out…

We ought to realize that a 3^rd round of quantitative easing is likely in the first quarter of 2012.

But in what form?

Remember, since March of 2009, quantitative easing has been the solution of last resort for the Federal Reserve to pull a failing stock market—and economy--out of the jaws of depression.

QE1 was, we are told, necessary to avoid a full blown depression…

Was it?

Maybe so…

Whether it was or not, QE2 came in 2010 and the markets rose again…

The Threat Posed By Quantitative Easing

But like an addictive painkilling drug, the addiction becomes as much of a threat as the pain.

The markets rise for a while, but the causes of our economic malaise are not cured, and in fact, only worsen.

Unemployment is not improved by enough or long enough to matter…

The statistics are made presentable by spin doctors in Washington…

And other key indicators in the economy—income levels and the housing market--remain mired at recessionary levels.

Furthermore, billions of investor dollars have fled the stock markets during times of crisis…both in 2009 and in the last 7 months in 2011…

Liquidity Drives The Market

What does this mean?

Remember, it is liquidity that pushes stock prices higher…

Without liquidity able or willing to go into the market, prices cannot go up.

That presents us with a key question: With so much investor money on the sidelines…

Where is the money coming from to support the markets as money leaves?

And of course, to say nothing of pushing stock prices higher?

Well, it has come of late via the Federal Reserve.

It’s true, Federal Reserve intervention has been unprecedented the past couple of years…

But it is—or was—understood that the Fed’s intervention was through major financial players in the market…

You know the names, Goldman Sachs, Citibank, Wells Fargo, and many other banks in the US and abroad.

But the reality may be much more than that…

There are some interesting questions to be considered…

There are reports that the Federal Reserve’s intervention into the economy was more than just pumping massive amounts of cash into market players’ coffers so they could inject new money into the markets.

As noted above, this injection of cash was a shot in the arm to the markets…

And helped shore up lagging confidence in the greater economy.

But there is another way to look things from a much more cynical point of view.

It just may be that the fed’s medicine may have a very malevolent and ulterior motive that has nothing to do with reviving the economy…

And everything to do with owning the economy.

What am I saying?

Just that there is a strong possibility that the Federal Reserve not only funneled massive amounts of cash to the big money houses…

But it may well be that the Fed has been buying the market itself.

That is, the Federal Reserve may be a major stockholder of major industries across the board.

Uncle Ben Buys On The Cheap

The scenario might look something like this…

Stock prices fall as the economy contracts and millions of investors pull what is left of their portfolios out of the market and park it in money market or savings accounts.

Major banking stocks like Bank of America fall below the $5 level, the statutory minimum price for a stock to be bought in many financial institutions…

So what happens?

The Federal Reserve steps in and buys the stock—a ton of it—at very cheap prices.

Or maybe just stock futures…

The stock price goes up, and the market players are happy again.

Now, imagine repeating this process for major firms in key industries in the country.

And where does the Federal Reserve get the massive amounts of money to buy major American companies at wholesale prices?

Why, it creates the dollars electronically…out of thin air.

Now fast forward a few years…

In whose interest would it be to have repeating crises in the stock market?

Prices crash, people panic and take what money that have left and leave the market.

And in steps the Federal Reserve, who, with the push of a button, creates hundreds of billions of dollars, and become a major owner of all kinds of companies…

Do you think that such a thing has ever happened?

More to the point, do you think it hasn’t?

Let’s just agree that it might have happened.

The implications boggle the mind…

Can you imagine the Federal Reserve, with all the power it has in setting monetary policy, now having major ownership of “public” companies?

Perhaps controlling interest in banks, media, food suppliers, transportation?

The potential for outright control of the country by an entity that is independent of the federal government, faces no electorate, and is privately owned by god-knows-who, makes everything else in the country—elections, congress, even the judiciary—simple political theater.

If the Federal Reserve owns huge chunks of US companies, then the democracy we live in is nothing more than an illusion…

Is this possible?

What do you think?

And those are…The Gorrie Details.

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