Markets are Increasingly Manipulated

Because Michael Oliver had another obligation during my Tuesday radio show, I prerecorded him on Monday for my Tuesday show. As you will recall, on Monday the equity market smacked down very hard and as that was happening Michael confirmed that the support structure for the S&P was broken. By that score, it seemed pretty sure that we were finally going to see the long-awaited equity market meltdown. But clearly the President’s Working Group (aka the Plunge Protection Team or PPT) had other ideas about the direction of the market and they set out to do whatever it took to keep stocks from falling.

The creation of the PPT was another important departure from the notion that, in the longer-term, free markets provide optimal outcomes for society as a whole. But the creation of the PPT in 1987 provided the mechanism to quickly step in to change the direction of markets, if, in the opinion of the corporate elites who run America, it was in their best interest. Of course, the Fed, Treasury, and all those involved tell us it’s for our good, but keep in mind that the Fed, for example, was created not for your good and mine but for the shareholders of the Fed—the major money center banks, which also happen to be linked to the people who manipulate the gold markets every day through the massive paper market activity.

I mention all of that because of the movement in the Key Metrics Table this week displayed above. With stocks having a rough day on Monday, it makes sense that some money flowed to the Treasuries as a safe haven. But why would gold, which is the other safe haven asset, not perform even better especially when inflation continues to run hotter than expected and when inflation is lethal for bonds? For that matter, why would the other monetary metal, silver, suffer a down week in this environment while commodities in general rise for the week?  

The answer is simply that markets are increasingly manipulated by our increasingly fascist economic elite. The Fed openly admits they manipulate interest rates lower and in fact have to do that now to keep the entire economy from blowing up, or should I say imploding, into a massive deflationary spiral of financial assets. And now, because of its permissive monetary policy, the Fed has a serious inflation problem on its hands. The last thing the Fed and the Biden Administration can afford from a propaganda point of view would be for gold and silver to confirm we are heading into serious inflation problem. This has to be a non transparent operation because if the public knew these elites were manipulating gold and silver lower, it would tip the public off to the truth about inflation. And so, if a profit motive can be made available to traders on trading desks to keep gold and silver prices subdued, it’s a very easy thing to do. Just this week Bloomberg reported that two traders at Bank of America Corp. bragged about how easy it is to manipulate gold and silver prices through a spoofing operation (https://tinyurl.com/23tr2z9j). And it seems likely Wall Street profit pit bulls were turned loose last week to be sure investors don’t get “the wrong idea” about the government’s message that inflation is transitory.

Transitory is certainly not the idea one gets from my Inflation/Deflation Watch (IDW) shown on the prior page. As of this month with still another week to go, my IDW has hit still another new high at 188.1, which compares to its March 27 COVID-19 low of 135.78. In other words, since the Fed has begun printing massive amounts of money to fund the lion’s share of our surging federal deficit, my IDW has increased by 38.6% in 16 months!

But let’s take a look at the components of the items in my equally weighted IDW. Oil, Housing, Copper, the Rogers Raw Materials, and Silver, all of which are tangible commodities, have increased massively. In fact, since these items are weighted evenly, let’s see what percentage of gains have come from these commodities (which the establishment thinks of as “bad” inflation) compared to financial assets (which the establishment considers “good” inflation even though good inflation serves to redistribute wealth from the middle class to the wealthy). Adding up the percentage items for all the “good” inflation items (black items in the chart) with all the “bad,” we get a total of 814 percentage points. A total of 587 percentage points, or 72.1%, of the gain since March 27 are from “bad” inflation items. In the meantime, during this time when commodities have started their run higher, the dollar has lost ground and U.S. Treasuries lost 11%. The loss of Treasuries makes sense in terms of higher equities. But with these inflation items far outweighing financial asset inflation since March 27, 2020, not to mention the government’s own understated CPI of 5.2% and its understated PPI of 7.3%, gold has some catching up to do. I feel quite sure that despite state sponsored bank manipulation of the paper markets to keep honest price discovery from occurring in the gold and silver markets, just as price discovery of capital is denied in the bond markets, markets will ultimately prevail. And given my view that higher rates of “bad” inflation are in their early stages, I think the odds favor a major move higher in gold before the end of this year and I suspect we are likely to see a further decline in TLT, meaning that interest rates are destined to rise. Yes, gold can rise when interest rates rise as the markets wake up to the fact that real rates are plunging, just as happened in the 1970s. But market forces will drive nominal rates higher. Then the Fed will be forced to print more money faster and faster in a hyperinflationary trajectory that will ultimately prove to be a futile effort to maintain financial repression. The defiance of natural market forces is indeed our undoing!

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.