- Last week, Goldman Sachs was on the congressional hot
seat, grilled for fraud in its sale of complicated financial products called
"synthetic CDOs." This week the heat was off, as all eyes turned
to the attack of the shorts on Greek sovereign debt and the dire threat
of a sovereign Greek default. By Thursday, Goldman's fraud had slipped
from the headlines and Congress had been cowed into throwing in the towel
on its campaign tobreak up the too-big-to-fail banks. On Friday, Goldman
was in settlement talks with the SEC.
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- Goldman and Wall Street reign. Congress appears helpless
to discipline the big banks, just as the European Central Bank appears
helpless to prevent the collapse of the European Union. . . . Or are they?
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- Suspicious Market Maneuverings
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- The shorts circled like sharks in the Greek bond market,
following a highly suspicious downgrade of Greek debt by Moody's on Monday.
Ratings by private ratings agencies, long suspected of being in the pocket
of Wall Street, often seem to be timed to cause stocks or bonds to jump
or tumble, causing extreme reactions in the market. The Greek downgrade
was suspicious and unexpected because the European Central Bank
and International Monetary Fund had just pledged 120 billion Euros to avoid
a debt default in Greece.
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- Markets were roiled further on Thursday, when the U.S.
stock market suddenly lost 999 points, and just as suddenly recovered two-thirds
of that loss. It appeared to be such a clear case of tampering that Maria
Bartiromo blurted out on CNBC, "That is ridiculous. This really
sounds like market manipulation to me."
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- Manipulation by whom? Markets can be rigged with computers
using high-frequency trading programs(HFT), which now compose 70%
of market trading; and Goldman Sachs is the undisputed leader in
this new gaming technique. Matt Taibbi maintains that Goldman
Sachs has been "engineering every market manipulation since the Great
Depression." When Goldman does not get its way, it is in a position
to throw a tantrum and crash the market. It can do this with automated
market making technologies like the one invented by <http://www.webofdebt.com/articles/computerized_front_running.php>Max
Keiser, which he claims is now being used to turbocharge market manipulation.
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- Goldman was an investment firm until September 2008,
when it became a "bank holding company" overnight in order to
capitalize on the bank bailout, including borrowing virtually interest-free
from the Federal Reserve and other banks. In January, when President Obama
backed Paul Volcker in his plan to reinstate a form of the Glass-Steagall
Act that would separate investment banking from commercial banking, the market
collapsed on cue, and the Volcker Rule faded from the headlines.
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- When Goldman got dragged before Congress and the SEC
in April, the Greek crisis arose as a "counterpoint,"
diverting attention to that growing conflagration. Greece appears to be
the sacrificial play in the EU just as Lehman Brothers was in the U.S.,
"the hostage the kidnappers shoot to prove they mean business."
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- The Nuclear Option
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- It is still possible, however, for the European Central
Bank to snatch Greece from the fire and rout the shorts. It can do this
with what has been called the nuclear option -- "monetizing"
the debt of Greece and other debt-laden EU countries by effectively "printing
money" (quantitative easing) and buying the debt itself at very low
interest rates. This is called the "nuclear option" because it
would blow up the hedge funds and electronic sharks operated by Goldman
and other Wall Street heavies, which specialize in bringing down corporations
and whole countries for strategic and exploitative ends.
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- Will the ECB proceed with this plan? Perhaps, say
some experts. It could just be waiting for the German election on Sunday,
which the ECB does not want to appear to be influencing.
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