How The Fed. Manipulates The Stock Market 101.
From Greg M
Lions and friends.
I want to explain how a central bank, in this case, the Federal Reserve manipulates the stock market.
In my video blog we have covered multiple times that the Federal Reserve can continue to prop up the stock market by using three mechanisms.
The Fed. can buy more debt and keep bond yields suppressed.
The Fed. can buy stocks.
The Fed. can weaken the dollar.
The first two on the list above are pretty much self explanatory as to how they work however, number 3, which states that “The Fed. can weaken the dollar” may be a little harder to understand.
Central banks can, and do, manipulate the value of their currency.
Here is how it works. In order to weaken its currency, a central bank sells its own currency and buys foreign currencies. The result is that the manipulating central bank reduces the demand for its own currency, while increasing the demand for foreign currencies.
A weak currency IS stock market positive.
The current bond market selloff has rattled the stock market, but in my opinion, being that this is a Presidential SELECTION cycle, the Fed. is attempting to keep “the illusion of the market going,” (people believe that if the stock market is high, then the economy is strong).
Knowledge is POWER my friends…
I hope this helps.
GM
Good morning Greg. People still blow my mind, there are people thinking still the economy is great and strong. I don't know how people can think that, with food prices up over 50%, fuel prices sky rocketing, rent, utilities. People in my area think everything is so "hunky dory" even though people here work 2 jobs and have 3 families living in the same house.. I can't wrap my mind around it. Thank you for keeping all of us on the correct side.
You have a great talent for reducing the criminal machinations of the Fed to easy bite size pieces! Thank you, Greg, for continuing to sound the alarm for those of us who have awakened to share with those still sleeping.