Take your
pick--here's three good reasons to engineer a "crash" that benefits
the few at the expense of the many.
There is
an almost touching faith that markets are rigged when they loft higher, but
unrigged when they crash. Who's to say this crash isn't rigged? A few things
about this "crash" (11% decline from all time highs now qualifies as
a "crash") don't pass the sniff test.
Exhibit
1: VIX volatility Index soars to "the world is ending" levels when
the S&P 500 drops a relatively modest 11%. The VIX above 50 is historically
associated with declines of 20% or more--double the current drop. When the VIX
spiked above 50 in 2008, the market ended up down 57%. Now that's a crash.
Exhibit
2: The VIX soared and the market cratered at the end of options expiration week
(OEX), maximizing pain for the majority of punters. Generally speaking, OEX
weeks are up. The exceptions are out of the blue lightning bolts such as the
collapse of a major investment bank. Was a modest devaluation in China's yuan
really that unexpected, given the yuan's peg to the U.S. dollar which has risen
20% in the past year? Sorry, that doesn't pass the sniff test.
Exhibit
3: When the VIX spiked above 30 in October 2014, signaling panic, the Federal
Reserve unleashed the Bullard Put, i.e. the Fed's willingness to unleash
stimulus in the form of QE 4. Markets reversed sharply and the VIX collapsed.
Now the
VIX tops 50 and the Federal Reserve issues an absurd statement that it doesn't
respond to equity markets. Well then what was the Bullard Put in October, 2014?
Mere coincidence? Sorry, that doesn't pass the sniff test.
Why would
"somebody" engineer a mini-crash and send volatility to "the
world is ending" levels? There are a couple of possibilities.
1. The
Shock Doctrine. Naomi Klein's landmark study of how manufactured crises are
used to justify further consolidation of power, The Shock Doctrine:
The Rise of Disaster Capitalism, provides a blueprint for how financial crises
set the stage for policies that extend the power of central and private banks
and various state-private sector players.
A soaring
VIX and sudden crash certainly softens up the system for the next policy
squeeze.
2. A
"crash" engineered to set up a buying opportunity for insiders. When
easy gains get scarce, what better way to skim a quick 10% than engineer a
"crash," scoop up shares dumped by panicked punters and
momo-following HFT bots spooked by "the world is ending" VIX spike,
and then reverse the "crash" with another round of happy talk?
3.
Settling conflicts within the Deep State. I have covered the Deep State for
years, in a variety of contexts--for example:
Is the Deep State
Fracturing into Disunity? (March 14, 2014)
The Dollar and the
Deep State
(February 24, 2014)
Surplus Repression
and the Self-Defeating Deep State (May 26, 2015)
Without
going into details that deserve a separate essay, we can speculate that key
power centers with the Deep State have profoundly different views about
Imperial priorities.
One nexus
of power engineers a trumped-up financial crisis (i.e. a convenient
"crash") to force the hand of opposing power centers. As I have
speculated here before, the rising U.S. dollar is anathema to Wall Street and
its apparatchiks, while a rising USD is the cat's meow to those with a longer
and more strategic view of dollar hegemony.
Take your
pick--here's three good reasons to engineer a "crash" that benefits
the few at the expense of the many.
http://www.zerohedge.com/news/2015-08-26/what-if-crash-rigged-everything-else
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