How to Conceal Massive Economic Collapse

Aug.16, 2008 in Market Outlook

“[T]he banking problems in the United States continue to mount, while the federal government’s deficit continues to soar out of control. . . . So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here’s the proof.

“When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.

“On July 16, 2008 . . . , the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. . . . So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others.”2

Just as central banks manipulate currencies in concert, so gold can be manipulated by massive selling of central bank reserves. Oil and any other market can be manipulated as well. But markets can be manipulated by only so much and for only so long without fixing the underlying problem. There is more bad news coming down the pike, news of such magnitude that no amount of ordinary manipulation is liable to conceal it.

http://www.globalresearch.ca/index.php?context=va&aid=9828

Latest

Lehman in talks to sell $40 bln in real estate: report

SAN FRANCISCO (MarketWatch) — Lehman Brothers Holdings Inc. is in talks to sell off about $40 billion in real estate assets, The Financial Times reported late Friday on its Web site, citing people close to the talks. Sources told FT that there was a gap between what Lehman and potential buyers thought of the portfolio’s value.

http://www.marketwatch.com/news/story/lehman-talks-sell-40-bln/story.aspx?guid=%7BBB89E0FB%2D5272%2D4F79%2DB373%2D3C25C3C2C2E3%7D&dist=hplatest

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