Bloomberg News Service's Caroline Baum has written a column, appended here, ridiculing suggestions that the U.S. government might be more involved in the equities, currency, and gold markets than it lets on. While the column is disappointing as journalism -- after all, journalism would consist of requests for access to Federal Reserve and Treasury Department records and meetings to which the public now is denied access -- this is actually progress. For Baum's inclination not to commit journalism is now on the record, even as the complaints of market rigging have just snuck onto the Bloomberg wire. Other market participants who increasingly note anomalous events will come across her column and be given ideas. Maybe someday a financial journalist will even commit journalism by examining both records and circumstantial evidence and putting some inconvenient questions to government and financial house officials. When that day comes, the joke may be on those who today are just sneering. CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. * * * I Am Not Now, and Have Never Been, a PPT Member By Caroline Baum Bloomberg News Service Monday, October 24, 2005 http://quote.bloomberg.com/apps/news? pid=10000039&cid=baum&sid=aASBFuJ4Nq_U Nothing elicits more vitriol from readers than columns about conspiracy theories. Mention "black helicopters" or the "plunge protection team" and your inbox will be inundated for weeks by folks venting their utter disdain and disgust at your pathetic naivete. Over the years I've dismissed the idea of a plunge protection team (PPT), a cabal of select government institutions (the Treasury and Federal Reserve) and large investment banks (Goldman Sachs is always mentioned) that allegedly intervenes to support the stock market from time to time. Imagine my surprise, then, when I learned quite by accident that I was a member in good standing of the PPT! Readers alerted me to my new, exalted status, documented in a footnote of a special report by John Embry and Andrew Hepburn of Sprott Asset Management in Toronto entitled, "Move Over, Adam Smith: The Visible Hand of Uncle Sam." The report, a collection of hearsay presented as research and given the veneer of credibility by copious references and footnotes, purports to present evidence that the U.S. government surreptitiously intervenes in the stock market. The evidence is hardly persuasive. For example, Embry dates the origin of the PPT to the Oct. 19, 1987, stock market crash. The following day stocks mysteriously rallied. According to a Wall Street Journal article he cites, "some knowledgeable traders" speculated that the Major Market Index futures contract, a proxy for the Dow Jones Industrial Average, was "deliberately manipulated by a few major firms as part of a desperate attempt to boost the Dow and save the markets." The buying had an outsized effect on the thinly traded MMI contract, raising the futures price to a premium over the underlying securities and prompting arbitragers to buy Dow stocks. Well, whoop-de-do. On any given day major firms buy securities to support their existing positions. There are folks who make a living capitalizing on the differences between cash and futures prices. And what's so unusual about a bounce after a 508-point slide? But in the eyes of the conspiracy theorists, this is evidence of a scheme to rig the markets -- not just stocks but gold, currencies, Treasuries, and oil. For the uninitiated, the origin of the PPT dates to the creation of the President's Working Group on Financial Markets following the 1987 stock market crash. The group, which includes the U.S. Treasury secretary, Federal Reserve chairman, chairman of the Securities and Exchange Commission, and chairman of the Commodity Futures Trading Commission, was formed to ensure the smooth operation of financial markets. The first reference to the group as a plunge protection team appeared in a Feb. 23, 1997, Washington Post article by Brett Fromson. How the government's "high-level forum for discussion of financial policy" morphed into a worldwide market-rigging operation is anybody's guess. Each of the agencies in the Working Group has a confidential contingency plan in the event of a financial crisis, Fromson reported. The SEC's includes maintaining a list of "everyone's home and weekend numbers" so that relevant officials, here and abroad, could be reached at any time. How positively quaint, especially when viewed from the Age of Blackberry. The government isn't the only entity concerned about the worldwide implications of a national financial crisis. Following the near- collapse of Long-Term Capital Management in 1998, the Council on Foreign Relations conducted a simulation exercise, organized by Roger Kubarych, senior economic adviser at HVB America Inc., to determine "financial vulnerabilities and their interconnections with broader economic, foreign policy, and national security considerations." The results of the exercise were published by the CFR in Kubarych's 2001 book, "Stress Testing the System." I attended the first meeting of the CFR's war-game exercise, which was a lively theoretical discussion of the issues. My participation is documented in footnote 72 at the bottom of Page 24 of Embry's report. Had he called me, I would have been happy to tell him what went on, best as memory serves. He didn't call or ask. I'm not a member of his club. (He clearly presumes I'm a member of the "other" club.) Conspiracy theorists stick together. They hang out on the same Web sites and chat rooms. They belong to GATA (the Gold Anti-Trust Action Committee). They swap the same fish tales back and forth, with the stories acquiring respectability through frequent repetition among believers. When I called Embry last week to see if he had any hard data on the PPT -- he quotes a money manager who claims almost everyone on the floor of the various U.S. futures exchanges has seen the PPT -- he said, "The weight of evidence, including continuous moves that make little sense, suggests that it exists." Besides, where was my proof, he wanted to know. The reason Embry can't support his theory with anything concrete is the government's "utter lack of official disclosure of the market interventions," he wrote in the report. Well, I'll be. The government is rigging the markets, and officials don't have the decency to comply with Regulation FD. Shameless. Before you e-mail me to say I couldn't possibly be as naive as all that, take a deep breath. I don't challenge the notion of a PPT that manipulates the markets because I think the government is virtuous. To the contrary, most politicians, Republican and Democrat alike, bend the truth (lie). The reason the notion of a global cabal is so preposterous is that the paper trail would be too long. Too many people would have specific knowledge of the PPT's operations. Some concrete proof would have surfaced by now. If the Fed were buying Standard & Poor's 500 futures contracts, the PPT's vehicle of choice, it would have to have an account. There would be a record of the transactions. There would be tax implications (oh, right, the Internal Revenue Service is in on it too). There would be balance-sheet implications because the Fed's purchases would add reserves to the banking system. Some back-office clerk would monitor the account to ensure it has adequate maintenance margin. ("Say, who is this A. Greenspan?") If you were a $30,000-a-year clearing clerk who saw the trades from the market-support operations, why wouldn't you grab a multimillion- dollar advance from a publisher to expose the conspiracy? This is explosive stuff. Still, I'd like to keep an open mind. Anyone who has first- hand knowledge of the PPT, please forward the evidence to me. If, on the other hand, you just want to vent, contact me at [EMAIL PROTECTED]. Complete archives at http://www.sitbot.net/ Please let us stay on topic and be civil. OM
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