By Patrick Heller, Market Update

There has been a constant stream of terrible financial news over the past nine months. This news makes investors leery of owing US dollars or dollar-denominated paper assets like stocks or bonds. When investors try to protect themselves by switching to other assets or currencies, the result is a decline in the values of the dollar and American stocks and bonds.

Apparently, the top priorities of the US Treasury and the Federal Reserve is that the US stock market must be supported and the price of gold held down, so as to avoid a massive exit from the dollar and American stocks and bonds. To accomplish this manipulation, the Federal Reserve trades short-term repurchase agreements with 20 approved primary government securities dealers. Among American dealers on this approved list are Bank of America Securities, Bear Stearns, Cantor Fitzgerald, Countrywide Securities, Daiwa Securities America, Goldman Sachs, Greenwich Capital Markets, HSBC Securities (USA), JPMorgan Securities, Lehman Brothers, Merrill Lynch Government Securities, and Morgan Stanley. As long as these companies use the liquidity provided by the repurchase agreements to do the government’s bidding, they will be allowed to make profits from the fees of the transactions.

When significant negative financial news is released, government officials know that this could scare investors into selling their US dollars and stocks and bonds and buying gold and silver with the proceeds. To diminish this effect, the Federal Reserve and Treasury (who know the bad news before its public release) give orders to boost stocks in the Dow Jones Industrial Average (DJIA) and to knock down the price of gold. Read the Full Numismaster Article Here