It's Settled: Central Banks Trade S&P500 Futures

It's official:  central banks do manipulate markets by artificially goosing up certain asset classes (equities and bonds), while suppressing others (precious metals).  "Conspiracy theorists" have been accurate all along, while the apologist deniers once again have egg on their faces.

This isn't just about "I told ya so."  When central banks distort markets, they are attempting to alter the laws of nature.  Eventually, mother nature wins, and this will end badly for all players.  Market manipulation can work short-term, but market gravity will eventually win out.  One can throw a ball in the air, and catch it, temporarily suspending the forces of gravity.  But once released, the gravitational force will eventually cause the ball to drop back down to earth.

Similarly, artificial demand for collateralized mortgage bonds was propped up by favorable credit ratings and institutional fraud, with the underlying premise that US home buyers would not default on their mortgages, irrespective of their creditworthiness--as long as home prices appreciate into perpetuity.  When those assumptions were proven wrong--horribly wrong--the subprime mortgage market cratered and cascaded into a systemic banking crisis.  In turn, the real estate collapse triggered a financial meltdown as credit markets seized up, destroying liquidity.

Despite rhetoric proclaiming debt monetization stimulates the economy, QE was intended to save bank balance sheets, and the Fed stepping up as the buyer of last resort of Treasuries and MBS as investor demand collapsed.  For the same preventative reasons, central banks are buying up SP500 futures to prop up the stock market as investors (both retail and institutions) flee the rigged casino, due to loss of investor trust.  Without central bank buying, markets would have collapsed due to the dearth of buyers.

Stock and bond markets are truly Potemkin villages standing on their last legs.  Removing the artificial props would collapse the foundations, prompting more central bank intervention.  The unprecedented level of interventions will not end well and astonishingly reveal the desperation of the central planners.

http://www.zerohedge.com/news/2014-08-30/its-settled-central-banks-trade-sp500-futures