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If you have ever doubted that Wall Street is thriving on Main Street's pain, think about today's (March 26) stock market action. Federal Reserve head Ben Bernanke is manipulating stocks upward once again -- something he has been doing for several years. Whenever Bernanke, or the Fed itself, hints that the economy is weak and more liquidity may be needed, stocks leap. Over the weekend, Bill Gross of bond fund PIMCO said that the Fed might hint that it would launch another round of buying bonds to artificially drive down long term interest rates. The first two times the Fed had such programs, called QEI and QEII, stocks leapt, as they should when money gets easier. (Short rates are already at almost zero, and have been since 2008. The Fed says they will stay that low until 2014.)

This morning Bernanke said that the improvement in employment might not be sustained. Wall Street, already primed by Gross's remarks, responded: stocks are soaring. If the employment situation actually improved, the Fed could not longer feed Wall Street all this juice. So Wall Street prays that Main Street will continue in the doldrums. This Fed market manipulation is exacerbating one of our worst economic problems: the extremely uneven distribution of wealth and income. More than 90% of financial assets, including stocks, are owned by the richest 10%, and the top 1% own 38%. This madhouse creation of liquidity, in which foreign central banks are participating, will end very unhappily with either inflation or financial bubbles or both. When? No way to say. Personally, I have been buying stocks for some time. This will go on for awhile before the crash. I could be wrong, of course.

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Comments

SurfPuppy619 March 26, 2012 @ 8:31 a.m.

Ben Bernanke and Tim Geithner should have been fired 10 years ago, same with Holder. Obama has been the biggest let down ever for me.

I think they are calling what Ben does ZIRP;

The zero interest rate policy is a macroeconomic concept describing conditions with a very low nominal interest rate, such as those in contemporary Japan and, since December 16, 2008, in the United States. It can be associated with slow economic growth.

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Don Bauder March 26, 2012 @ 12:56 p.m.

All Bernanke has to utter is the word "accommodative," as he did this morning, and stocks jump. Historically, the zero interest rate policy may goose the stock and bond markets, but eventually it is disastrous. And it really doesn't stimulate the economy that much. It has done little to nothing for Japan and little for us. Think of it this way: we suffered the worst downturn and the weakest recovery since the Great Depression, but stocks have doubled since 2009. Stocks are responding to liquidity, not to the economy. Best, Don Bauder

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SurfPuppy619 March 26, 2012 @ 6:12 p.m.

Don, you are one smart cookie-thanks for that response, it was on the money...

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Don Bauder March 26, 2012 @ 9:06 p.m.

Even though all this worldwide, central bank-manufactured liquidity will end unhappily, and perhaps calamitously, the question is when it will end. For now, I have climbed to about 31% in stocks (virtually all yielding 3.5% to 7%), mostly blue chips, for I don't think armageddon will come soon. But I imagine I will get trapped. You can't time the market. Best, Don Bauder

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