January 4, 2019 | Plunge Protection Myths = Keynesian Economic Myths

QUESTION: What about what China did by buying stocks a few years ago to stop the hang sang from dropping

LW

During the collapse of the Nikkei after 1989, companies held believing that the government would support the market. When they realized the government could not then the government encouraged us to bail out the Japanese corporations. We helped well over 300 public companies issuing a note to buy their portfolios at their cost with 10-year payouts and each note had to be approved by the Japanese government individually. If the governments were able to actually prevent declines, then they would. But nobody can do that for the size of the public at large far outweighs any institution, group of institutions, or banks.

People would rather believe in conspiracy theories than simply look at the reality. Attempts to manipulate markets ALWAYS fail because the majority is far greater than any minority. The trend is made by the MAJORITY. A panic sell-off like the Crash of 1987 took place BECAUSE there was not bid – not that there was a massive short position. Scare the MAJORITY and they then try to sell, you find no bid and that is how a flash crash unfolds. This is why outlawing short positions is destructive for the only person with the courage to try to catch a falling knife is the one who is taking profit – not initiating a long position.

Martin Armstrong January 4th, 2019

Posted In: Armstrong Economics

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