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Government Intervention Causes Market Volatility

August 30, 2011 by  

Government Intervention Causes Market Volatility

The Wall Street Journal reported on Monday that current volatility in the stock market is related to constant government manipulation and creation of a false sense of security among investors who are looking forward to more bailouts. A phenomenon, referred to as moral hazard, sparked sharp increases and then sharp drops in stock prices as investors awaited Federal Reserve Chairman Ben Bernanke’s Jackson Hole speech on Friday.

Though no immediate third round of quantitative easing (QE3) — or money printing — was announced by Bernanke on Friday, his speech noted that many of the economic problems in the United States are beyond the control of central bank intervention. The chairman also noted subtly that the actions that the central bank has taken will have definite and irreversible effects on the economy in the long term.

“Normally, monetary or fiscal policies aimed primarily at promoting a faster pace of economic recovery in the near term would not be expected to significantly affect the longer-term performance of the economy. However, current circumstances may be an exception to that standard view…” said Bernanke during his speech. “Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months. Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well.”

Bernanke seemingly advocated political policy that would further grow the number of jobs in the public sector. More government jobs will require the government to take on more debt, and require more quantitative easing, eventually. The liberal view of exciting economic growth through government intervention, the same government intervention that creates market volatility on a daily basis, creates worries among many free-market economists.

The argument against what has been dubbed the broken-window fallacy (i.e. disaster, war, widespread panic, social unrest and things of the like create government jobs) is that this creates an incentive for government to create these problems in order to drive the market. The suggestion of liberal economist Paul Krugman’s Aug.14 suggestion that a fake alien invasion would bring the economy out of its slump is an example of this economic fallacy.

Following the Jackson Hole address last week, economists who have based their economic principles on the Keynesian model have cried for more quantitative easing and more government intervention to create jobs. Krugman is among their ranks.


Sam Rolley

Staff writer Sam Rolley began a career in journalism working for a small town newspaper while seeking a B.A. in English. After learning about many of the biases present in most modern newsrooms, Rolley became determined to find a position in journalism that would allow him to combat the unsavory image that the news industry has gained. He is dedicated to seeking the truth and exposing the lies disseminated by the mainstream media at the behest of their corporate masters, special interest groups and information gatekeepers.

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  • Alex

    Nothing that can be done about it, except to vote them out of office. Or we can just blame the Tea Party. Seems even TIME magazine has jumped on that bandwagon. The philosophy of “cut spending, shrink government, limit entitlements, and lower taxes” has somehow caught the blame for “keep spending, blank check, no cuts, raise taxes … and fight for it until the eleventh hour.”

    I’m still clueless as to how anyone actually thinks the Tea Party is even remotely to blame. But I’ll read the TIME article and see what they have to say. Thus far, I’ll I’ve heard is John Stuart, but his criticisms mean nothing to me. I think he’s an ignorant boob.

    • James

      Alex, How do you vote Ben Bernanke out of office?

  • tim

    The market created one of the biggest recessions in history. Let them get out themselves. Nothing they do is gonna help the little guys who have lost thier azzez in thier 401k’s. Only gonna help the fat cats who made millions during the last bailout!!!!!

  • s c

    Constant intervention by Uncle Scam amounts to something that would get a mere mortal in MUCHO trouble. It makes Uncle Scam a stock market SPECULATOR. A speculator, if you’ve been keeping up on the crap we call news, is someone who puts himself before everyone else, in an attempt to manipulate the market(s).
    Uncle Scam’s ‘expertise’ is defective and self-serving. Mortals can’t plead innocence, but Uncle Scam can. Beyond that, Uncle can and will claim omniscience. When you have the ability to absolve yourself, it slants your perspective, and when coupled with the Fed’s “license” to print money at any time for any reason, the American people get hit with a double whammy.
    We feel that double whammy. Uncle Scam, having no emotions (and NO brain) has no reason to stop his evil behavior – especially when he doesn’t feel anything. The Fed, because it’s a PRIVATE CORPORATION that operates above the laws of the land, acts as judge and jury, and has had NO small part in trying its best since 1913 to MURDER the dollar.
    Fed, may you be aborted and long forgotten. Uncle Scam, learn to be acountable, or face the wrath of the American people. “Yes, we can” rip you a new one. Tyrants tend to get what they deserve, and BOTH of you bottom-feeders deserve nothing less than a complete political and economic retrograde abortion.

    • Al Sieber

      Very well put sc, you hit the nail squarely on the head. next will be QE3, I would rather see a Alien invasion at least we stand a chance.

    • Isaac Davis

      Every problem we face in America is directly tied to the meddling gov’t bureaucrats who server 2,4, and 6 yr terms and many are nothing but the lowest form of public servant with a lifetime of sitting on that ivory post. Most of the problems this nation faces was caused solely by gov’t morons, then those same morons turned around and taxed us on the monetary solutions to the very problems they manifested–and not one of the “problems” they contrived has ever been solved and put to bed. Even our phone bills still have a tax on them to pay for the Spanish-American War, so their is irrefutable evidence to show that waste/fraud/abuse is rampant and regular business from the local to the national levels of gov’t. But, many in this country have no clue about the reality of gov’t, and continue to be duped into believing that their preoccupation with such mindlessness as sports is somehow unrelated to being manipulated by gov’t bureau-clowns.

      The runaway freight train is gaining momentum. At least some of us are enlightened enough to know that getting off of it before the speeds are lethal is intelligent action.

      To me, it is becoming clear just how this diabolical plan by such vermin as “gilharducci” could ever be pulled off to confiscate the trillions in 401k/ira’s…decimate the economy.

      The larger “unfunded liabilities” now exceed $115 TRILLION.

      • Al Sieber

        Good post Issac.

        • s c

          Al, so how long will it be until we hear progressive parrots and clanking robots rant about everything being GB’s fault and how that $115 trillion dollar ‘unfunded liabilities’ crap is ESPECIALLY GB’s fault?
          About the only thing that GB has evaded since progressive harpies started their retarded mantra is the idea that GB may or may not be responsible for global warming.

          • Dan az

            Now you did it.There going to start it now Thanks allot.Until they can figure out that there is no difference between them except maybe who is trying to out spend the other.We are never going to get a smaller gobmnt.If this crap dosen’t stop then I feel that we all need to secede from the union and start our own!Can’t be any worse then what we got now!

          • Al Sieber

            sc and Dan, wait until about the second week in Oct. when the real numbers on the economy come in, could be like 1929 again only 5 times as bad.

  • James

    With no more bailouts from the feds, we will sink deeper into recession. Bailouts were designed to prevent that, but they merely postpone the inevitable, until personal debts are paid off or canceled there will be no recovery

    • Bruce

      James, bailouts by our government (read “we, the people”) do “merely postpone the inevitable, …”, but sometimes the hurt must be dealt with quickly. I, for one, am tired of our government telling us that this company or that company is too big to let slip into dissolution (remember the Ma Bell controversy?). Agriculturally, this is akin to “culling the herd”. Thanks to the bailouts, the big companies have continued to give out handsome bonuses. In fact, some that are supposedly under the now “public” domain due to “bailouts” (read “loans”) have now tried to pay we, the people, back by opening up more jobs south of the border ( ). And how many people are still unemployed here in “our country”? Our government is doing the same thing you state will promote recovery – namely, they’re building an oversized debt that we, the people, will not be able to afford to pay off.

  • chuckb

    we can recover very easily. remove the cause, remove the politicians who have spent us into oblivion. these people have practically destroyed our nation with their spending. it would be very easy to stop it, quit voting back into office the same people that have caused the problem. we have handed out welfare to every person who have crossed our borders illegally, millions, we have a super large welfare class already here and they demand more. on the other end we have people like george soros and buffett who have gained super fortunes and then use this power to manipulate markets as they are trying to do at this moment. something like what caused the 29′ market crash. these kind never get enough, it’s like a game and the working people end up the losers. they keep people like barry in office, he’s easy to manipulate and do their bidding, he’s ignorant of what’s going on and that’s what vacations are for. clean house in washington, clean out the liberal progressives (bolsheviks) clean out the boehners and mcconnells. at least it will take the new ones many years to get us back in this kind of mess. also remove the illegal population, this has been done before and it can be done again, this time it is imperative.

    • WickedPickle

      @chuckb OMG!! Just listen to you chuck.. “remove the politicians who have spent us into oblivion. these people have practically destroyed our nation with their spending. it would be very easy to stop it, quit voting back into office the same people that have caused the problem”.
      Don’t you know? Don’t you realize that there are political clones just waiting in line for their chance (to screw the nation)? You can’t tell the bad guys because they look, act and smell just like the one’s who were elected before them. And for those moralistic folk who (somehow) find themselves suddenly in the spotlight.. Irregardless of their determination, the old whigs who somehow live past the votes will not allow them to out-do them thus will be stifled until they too eventually fall into the same greedy pit that those before them thought they could make a difference until they faced their political veterans who stifled them.. What we really need is a pack of Eliot Ness’ but.. How can you recognize them from the scar faces that (we allow to) run the nation?

  • Dan az
  • chuckb

    dan, it seems to me they already have infiltrated the presidency. what i don’t understand is how do the jews and muslims get along in his cabinet, something very strange going on there, maybe the muslims are also communist that would explain it, but, how could that be.

    • s c

      chuckb, I don’t mean to interrupt, but if Muslims run true to form, they will embrace Fascism, just like they did in WWII. So, I don’t know how they can justify combining Fascism with their religion, but the closer we get to the day when governments around the world collapse (and people turn to their respective faith(s), it may make sense then.
      At the moment, the combinations of various groups being in the same bed are truly mind-boggling.

  • WickedPickle

    NO MORE BAIL OUTS! NO MORE BAIL OUTS!!.. When my dad owned our (now defunct) b’ness and began having problems, there was no one there to bail him out nor thousands of other small b’ness owners and they were content.. They went into it with their eyes wide open, knowing just like life that they were taking a financial chance.. That it failed was just one of the results of speculating with your future.. Now we have mega-corporations (which I might add were there to pick up our loved one’s pieces for pennies on the dollar when they failed) now think their so damn big that America should bail them out, not because their losing their shirt but because their not making the profits that one of their exes crowed they’d make. Hey! These people aren’t hiring new employees, their only over working the one’s they decided to retain.. Let them feel a little loss, in that way they may fight hard enough to get themselves out of the red instead of crying wolf because their profit margin isn’t to their liking. NO MORE BAIL OUTS!!!

  • chuckb

    wicked pickle, you hit it on the head, no more bailouts. barry is doing a dance at the moment, he just paid off boehner to help him out with the budget, he may not have any capital to bargain with. however, he may luck out, boehner and mcconnell are easy, they may take an iou.
    after waiting for years i got polled for the first time last night, the rasmussen poll called and at last i got to put my two cents in. barry-F, reid, pelosi, boehner and mcconnell i gave them a four, that is the worse rating possible.

    what i said about removing the politicians, i agree, each time new ones enter the congress they are quickly stained by the veterans, what i meant is to remove all the current occupants, audit them and any with any discrepancy, strip them of their retirement and bank account, possessions gained after entering congress and let them break rocks for awhile.

  • JD

    I am afraid we will never be able to vote ourselves out of our predicament . We are divided as a nation with an inbred notion of party loyalty and both sides are bringing us down . Both parties pay lip service to their respective choirs, spend and waste money like no tomorrow and lay the blame on everyone else . Our empire like all others before it will fall and we see it coming . There is no peaceful solution and any real change will be fought tooth and nail to maintain the status quo . The few that are really willing to fight for whats right are a meaningless power so might as well pull up a chair and a cold one and enjoy the show as the ship slowly sinks .

  • chuckb

    jd, one mistake we have made is opening the door to everyone throughout the world to enter. there’s no such thing as the land of the free and a lot of the people coming here are under the illusion they are free to set up their own culture and ignore ours. the last few administrations have made much effort to stem the tide of illegals, the government has suppressed our way to satisfy the incoming, these are people from all over the globe and mostly hostile to our way of life. it’s my contention if we allow people to become citizens then they should pledge allegiance to our way and leave their culture behind and this is not happening, just the opposite. so you may be right, the way it is going we may see anarchy in our cities and this will lead to urban warfare.

  • Chris

    At least America is the food basket of the world.If worst comes to worse,We will be better off that any other conrty.You can’t eat gold or silver,or drink oil.So long as we have that,we will make it through what ever comes are way.WE are Tough in this country,we’ve fought more than enough wars to propve it.

  • Bill wright

    I think you”ve made a good point there Chris,China and Japan are just some of the countries that will be badly hurt by the melt down that’s coming.


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