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This commentary entitled "Government Intervention in Financial Markets is Hurting Working Americans" was written 6 months ago (May, 2009) by Robert B. Tobiasz. Please take a moment to read it and, especially, take note of the two conclusions regarding the net effect of government intervention/manipulation in our financial markets:

"Very few Americans are aware of the existence of the Working Group on Financial Markets, also known as the Plunge Protection Team (PPT). This group was created by Executive Order 12631 and signed into law on March 18, 1988 by President Ronald Reagan.

The PPT was established in response to the stock market crash of October 19, 1987 ('Black Monday'). Its purpose was to make recommendations for government and private business solutions for "enhancing the integrity, efficiency, orderliness and competitiveness of United States financial markets and maintaining investor confidence."

The PPT, per Executive Order 12631, was to consist of the following members:

- The Secretary of the Treasury, or his/her designee. Today that would be Tim Geithner;

- The Chairman of the Board of Governors of the Federal Reserve System ('the FED'), or his/her designee. Today that would be Ben Bernanke;

- The Chairman of the Securities and Exchange Commission ('the SEC'), or his/her designee. Today that would be Mary Schapiro;

The Chairman of the Commodity Futures Trading Commission ('the CFTC'), or his/her designee. Today the Acting Chairman of the CFTC is Walter Lukken since the Obama Administration has been unable to receive confirmation on its choice, Gary Gensler. Since Mr. Gensler worked with others to exempt credit default swaps from government regulation (refer to my March, 2009 Commentary), the opposition is, in my opinion, justified.

The purpose of the PPT seems innocent enough. After all, making recommendations for government and private business solutions for 'enhancing the integrity, efficiency, orderliness and competitiveness of United States financial markets and maintaining investor confidence' almost seems akin to "motherhood and apple pie."

Unfortunately for the citizens of the United States, the PPT, aided and abetted by selected Wall Street firms such as Goldman Sachs and JP Morgan, Chase, have intervened (intervention is the polite word; it's actually manipulation) in essentially every single financial market (stocks, bonds, commodities, interest rates, etc.) in such ways to enrich the "Wall Street Club" while impoverishing the "everyday working men and women" in the United States.

Let's look at a couple of examples of what I've outlined above.

Example #1

As many of you know, the stock market crash in the high technology sector (so-called 'dot-com crash') took place between March, 2000 and October 2002 and wiped out about $5 trillion in market value of these technology companies.

The PPT, with the FED under Chairman Alan Greenspan as the point man, responded to the 'dot-com crash' by lowering interest rates in hopes of reigniting the unsustainable dot-com boom and preventing a recession. Fortunately, for most of us, Greenspan wasn't successful with this ploy. I say 'fortunately for most of us' because, had Greenspan been successful, a far greater debacle would have occurred when the bubble eventually burst a few years down the road. During this period of time, I had the dubious distinction of conducting financial analyses on many dot-com businesses seeking capital investment. I can tell you unequivocally that the majority of these businesses were "pipe dreams built on sand and hot air" which never had any realistic chance of becoming viable business entities earning a profit.

Unfortunately for us, Greenspan's success in reducing interest rates to artificially low levels led to tremendous sums of money being diverted into residential and commercial real estate. Americans were convinced that real estate prices would go up forever so they began to buy or refinance real estate of all types (residential, commercial, land, vacation homes, etc.) with little or no regard for risk. We all now know that there was a great deal of risk associated with many of these real estate investments and Americans, from all walks of life, have paid and are continuing to pay the price for this 'investment mania.' In fact, the foreclosure notices for April, 2009 of 342,000 homes (one out of every 374 U.S. homes) were termed a "shocker" by CNN Money. This is a clear indication that the real estate slide is far from over irrespective of what government officials and people in the mainstream media (MSM) may say from time to time.

The point to be made in all of this is that had the PPT, via Alan Greenspan of the FED, not intervened in the interest rate market after the dot-com collapse, we never would have had a real estate collapse of the magnitude we are currently experiencing.

Example #2

Most Americans know very little about gold other than it is yellow, shiny, valuable and often used in jewelry. In truth, gold is much, much more. It is and has been, for thousands of years, 'real money' as opposed to the various paper currencies that have been used as money throughout the world. Just as importantly, gold was the ultimate 'canary in the coal mine' in the sense that a rising gold price would warn a country's citizens that something was wrong with their financial system and corrective action had to be taken.

The PPT, with former Clinton Treasury Secretaries Robert Rubin and Larry Summers (Summers is now Director of the National Economic Council in the Obama Administration) as point men, implemented, starting in approximately 1995, a plan to suppress the price of gold. Why? Because detailed economic studies (refer especially to Gibson's Paradox) show that the price of gold and the price of money (i.e. interest rates) should move in the opposite direction.

Therefore, if the PPT wanted to lower interest rates, as Greenspan did in Example #1 above, the price of gold should have increased substantially. A rising gold price would have then alerted the people in the U.S. that something was wrong with their financial system in the years 2001 until today. By using various financial devices (swaps, gold leasing, derivatives, etc.) the PPT was able to stop gold prices from rising to their true levels (prices have risen but not to their true levels). Thus the PPT disabled the 'warning system' that would have alerted us to something being very wrong with our financial system.

These examples are just two of many that I could cite which clearly demonstrate that government intervention/manipulation in our financial markets have had the following results:

1. substantial financial and personal losses and pain for everyday working men and women; and

2. massive financial windfalls for the "Wall Street Club" and its cronies.

In closing, I'd like to leave you with these words from Thomas Jefferson:

'If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks.will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.'..."

Slice it any way you want, but the government's relentless intervention in the financial markets - in my opinion also - is preventing, not helping or enhancing, economic recovery.

At least not for the people.

- Ed Smith, Publisher
The EHS Letter Manual