A L E R T

Fed Panic Indicates Mounting Instabilities

Currency, Gold and Oil Market Intervention Highly Likely

Mr. Bernanke’s panicked 75 basis point (0.75%) interest rate cut this morning, in the face of what appeared to be a likely troubled open for the U.S. stock market most certainly was done in conjunction with the activities of the Plunge Protection Team (PPT a.k.a. the President’s Working Group on Financial Markets). Beyond manipulation of stock futures contracts, PPT coincident activities in past crises also have involved direct, coordinated central bank intervention aimed at supporting the U.S. dollar and at depressing gold and oil prices. Such appears to be at work as stocks "rally" off their opening lows around 10 a.m. ET.

Bernanke appears to have moved, as Greenspan did in the October 1987 financial panic, to abandon fully the greenback in hopes of propping stocks artificially. Irrespective of what happens in the markets today and tomorrow, there is no happy news in this circumstance, with the U.S. financial system so heavily dependent on foreign capital for liquidity. Beyond the short-term games played by the central banks, the general outlook remains pretty much the same, with a deepening inflationary recession, a major bear stock market, heavy selling of the U.S. dollar, heavy buying of gold, and an eventual flight to safety away from the greenback that will spike long-term interest rates (currently negative net of inflation). What is changing is that the eventual flight to safety away from the greenback is being pulled rapidly into the near future. 

Further details will follow in the January SGS newsletter. 

Posting of the January SGS is targeted for the week of January 28th. An e-mail advice will be made of its and any intervening Flash Update/Alert postings.