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STOCK MARKET COLLAPSE: MORE GOLDMAN MARKET RIGGING?

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Last week, Goldman Sachs was on the congressional hot seat, grilled for fraud in its sale of complicated financial products called "synthetic CDOs." This week the heat was off, as all eyes turned to the attack of the shorts on Greek sovereign debt and the dire threat of a sovereign Greek default. By Thursday, Goldman's fraud had slipped from the headlines and Congress had been cowed into throwing in the towel on its campaign to break up the too-big-to-fail banks. On Friday, Goldman was in settlement talks with the SEC.

Goldman and Wall Street reign. Congress appears helpless to discipline the big banks, just as the European Central Bank appears helpless to prevent the collapse of the European Union. . . . Or are they?

Suspicious Market Maneuverings


The shorts circled like sharks in the Greek bond market, following a highly suspicious downgrade of Greek debt by Moody's on Monday. Ratings by private ratings agencies, long suspected of being in the pocket of Wall Street, often seem to be timed to cause stocks or bonds to jump or tumble, causing extreme reactions in the market. The Greek downgrade was unexpected because the European Central Bank and International Monetary Fund had just pledged 120 billion Euros to avoid a debt default in Greece. Strategically-timed ratings downgrades of this sort are so suspicious that Indian market regulator SEBI recently created a stir by asking the rating agencies operating in India for periodic reporting concerning their fees and rating norms.

Markets were roiled further on Thursday, when the U.S. stock market suddenly lost 999 points, and just as suddenly recovered two-thirds of that loss. It appeared to be such a clear case of tampering that Maria Bartiromo blurted out on CNBC, "That is ridiculous. This really sounds like market manipulation to me."

Manipulation by whom? Markets can be rigged with computers using high-frequency trading programs(HFT), which now compose 70% of market trading; and Goldman Sachs is the undisputed leader in this new gaming technique. Matt Taibbi maintains that Goldman Sachs has been "engineering every market manipulation since the Great Depression." When Goldman does not get its way, it is in a position to throw a tantrum and crash the market. It can do this with automated market making technologies like the one invented by Max Keiser, which he claims is now being used to turbocharge market manipulation.

Whether Goldman actually crashed the market in this case will be left to conjecture, but Keiser explained in an email how it could theoretically be done:

"Remove all the buy orders that you control (since HFT traffic is 70% of the order flow, if you simply pull your HFT buy orders, you remove a huge chunk of the market - in a heartbeat leaving a sudden price vacuum). If you wanted to scare congress to vote the way you wanted them to vote - a congress that is directly invested in stocks trading on the exchange and ETF's tied to the prices on the exchange - just pull your buys. When they do what you want them to do - replace your buys. If you want to make the market go up - pull your sell orders. It works both ways.(It's all detailed in my Virtual Specialist Technology patent - how to make markets in an "infinite inventory environment.')"

Goldman was an investment firm until September 2008, when it became a "bank holding company" overnight in order to capitalize on the bank bailout, including borrowing virtually interest-free from the Federal Reserve and other banks. In January, when President Obama backed Paul Volcker in his plan to reinstate a form of the Glass-Steagall Act that would separate investment banking from commercial banking, the market collapsed on cue, and the Volcker Rule faded from the headlines.

When Goldman got dragged before Congress and the SEC in April, the Greek crisis arose as a "counterpoint," diverting attention to that growing conflagration. Greece appears to be the sacrificial play in the EU just as Lehman Brothers was in the U.S., "the hostage the kidnappers shoot to prove they mean business."

The Nuclear Option

It is still possible, however, for the European Central Bank to snatch Greece from the fire and rout the shorts. It can do this with what has been called the nuclear option-- "monetizing" the debt of Greece and other debt-laden EU countries by effectively "printing money" (quantitative easing) and buying the debt itself at very low interest rates. This is called the "nuclear option" because it would blow up the hedge funds and electronically-driven sharks prowling in Greek waters, which specialize in bringing down corporations and countries for strategic and exploitative ends.

Will the ECB proceed with this plan?Perhaps, say some experts, since the Greek bailout has evidently not quelled the bond crisis. Germany, harboring fears of a Weimar-style hyperinflation, would be expected to contest the nuclear alternative; but there is evidence that what actually triggered the Weimar inflation has been distorted in the history books. The Federal Reserve has lent massively to its member banks at near-zero interest rates without triggering hyperinflation in the United States.

 

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling WEB OF DEBT. In THE PUBLIC BANK SOLUTION, her latest book, she explores successful public banking models historically and (more...)
 

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The Greek bailout is unlikely to work because the ... by Ellen Brown on Saturday, May 8, 2010 at 3:37:30 PM
This is excellent.I don't fully get the big pictur... by John Bessa on Saturday, May 8, 2010 at 9:27:26 PM
Another good article by Ellen Brown. Since there's... by Robert Cogan on Sunday, May 9, 2010 at 9:25:51 AM
The house has it rigged so that they get the lion'... by Theresa Paulfranz on Sunday, May 9, 2010 at 10:41:57 AM
I have often thought that it could have actual val... by John Bessa on Monday, May 10, 2010 at 8:03:33 AM
Like Ron Paul and Ellen Brown, some of the posters... by ssg13565 on Monday, May 10, 2010 at 9:22:38 AM
Solutions depend on who implements them as much as... by John Bessa on Monday, May 10, 2010 at 3:57:58 PM
The link to your web site is broken, so I don't kn... by ssg13565 on Monday, May 10, 2010 at 4:27:06 PM
I am migrating from my technology-based thinman.co... by John Bessa on Tuesday, May 11, 2010 at 3:13:10 PM
I have read your link. Thanks for the mention of S... by ssg13565 on Tuesday, May 11, 2010 at 6:59:42 PM
As I thought your response would be bogus. Bringin... by John Bessa on Monday, May 17, 2010 at 3:49:17 PM
I was starting to fall for Ellen Brown's articles ... by ssg13565 on Sunday, May 9, 2010 at 4:01:45 PM
You haven't given me enough to respond to. What's... by Ellen Brown on Monday, May 10, 2010 at 5:59:43 PM
Let me just repeat what I was able to scribble dow... by ssg13565 on Monday, May 10, 2010 at 7:02:55 PM
It is not money, however you define it, that is th... by ssg13565 on Tuesday, May 11, 2010 at 11:16:54 AM
In recent hstory we almost had a world wide financ... by ssg13565 on Tuesday, May 11, 2010 at 11:29:13 AM
The banks can create money with the stroke of a pe... by Ellen Brown on Tuesday, May 11, 2010 at 4:51:16 PM
The ability of banks to lend at 6% and borrow at 0... by ssg13565 on Tuesday, May 11, 2010 at 8:15:36 PM
Ellen said, "borrower seeks loan, bank A advances ... by ssg13565 on Tuesday, May 11, 2010 at 8:22:27 PM
The reserve requirement is obsolete. See here --cl... by Ellen Brown on Tuesday, May 11, 2010 at 9:36:38 PM
Who is the author of the piece to which you link? ... by ssg13565 on Wednesday, May 12, 2010 at 6:52:00 AM
My mother is in the hospital and I have 2 presenta... by Ellen Brown on Wednesday, May 12, 2010 at 7:52:50 AM
Hope your mother gets well soon.I also hope you ar... by ssg13565 on Wednesday, May 12, 2010 at 9:34:21 AM
Yes they want me to lecture on banking, because I ... by Ellen Brown on Wednesday, May 12, 2010 at 10:24:57 PM
We may be closer to agreement than either of us th... by ssg13565 on Wednesday, May 12, 2010 at 10:24:31 AM
I got sidetracked from why this misunderstanding i... by ssg13565 on Wednesday, May 12, 2010 at 1:26:39 PM
Yes I am sure they think that "Simple solution to ... by ssg13565 on Thursday, May 13, 2010 at 6:48:21 AM
Your description of how the banks lost credibility... by ssg13565 on Tuesday, May 11, 2010 at 8:26:13 PM
Well, I wouldn't be surprised Goldman had a finger... by Lars Ahnland on Monday, May 10, 2010 at 6:36:55 AM
Impossible that it did not, as the inheritor of Zi... by John Bessa on Monday, May 10, 2010 at 8:07:33 AM
I am surprised that it took so long for that silly... by ssg13565 on Monday, May 10, 2010 at 9:12:22 AM
What if we had four kinds of money? They could be... by Theresa Paulfranz on Monday, May 10, 2010 at 10:02:32 AM
The other kinds would not work as money naturally ... by John Bessa on Monday, May 10, 2010 at 11:59:43 AM