The Fed Has Destroyed Price Discovery

by Chris

If you were in a “”market”” where each and every day some major player stepped in to either cap prices (gold/silver) or put very firm floors under each selling moment, making V-bottoms at every slight decline, eventually you’d find that price discovery is utterly destroyed.

This is where we find ourselves.

After a raft of terrible news coming out about macro-economic news, geopolitics (India and Pakistan) and corporate earnings, you’d expect some sort of a sell off…

But the dreaded “volatility” scares the Fed too much and so we see this, each and every day (this morning’s stock chart as of a few minutes ago):

Another day with a V-bottom and a ruler-straight frog-march up and to the right.

This is the signature of the “”market”” manipulators in charge.  They simply cannot abide any sort of negative price pressure without stepping in.  Micromanagement gone bonkers.

Should the markets be 30 points lower?  20?  10?  we’ll never know because wherever it was headed has been cordoned off and prevented.

This is what you get when your former Fed chair goes off to work for the firm that controls fully a fifth of the entire US equity market’s daily volume (Bernanke to Citadel), presumably after already having formed a nice working relationship earlier in his career.

What’s wrong with destroying price discovery?  Well, pretty much everything, not least of which is that it lays the groundwork for a truly horrible idea like MMT to germinate.

The post-facto rationalization used by MMT relies on the former price signals to have been correct.  They are not.  They are as artificial as Donald’s hair.

When the time comes, these people need to be held accountable.