The Calvary

Over the years I have heard many references, some behind the hand others more blatant, that there is more than Adam Smith's hidden hand guiding the market, in particular the stock and finance markets. You hear this particularly when there has been some out-of-the-blue event that would normally be expected to push the market down yet, miraculously, the market "performs" much more resiliently than you'd think. It's like being Custer, surrounded by Indians, but this time the Cavalry actually comes.

For instance, Katrina the hurricane was a stealth event. It was a large storm, but no one really expected it to have the killer punch it did have until just as it hit. And when it did hit, what did the stock markets do? Did they reel, shudder and fall under the weight of the mammoth destruction and disruption? Nope; the market was a heartless mother: http://guambatstew.blogspot.com/2005/09/heartless-mother.html

When you see the kinds of things that government actually gets caught out messing with (e.g., contra guns/drugs strategies, Watergate), it is easy to imagine that the effects of the markets are too dramatic to expect the government not to meddle (not to mention the money that's at stake). Plus, we do know that government central bankers must participate in financial markets to do their routine jobs of regulating rates, and do regularly "intervene" in the currency markets, even though that behaviour too is often somewhat opaque.

Yet, we also expect, and are led to believe, that the markets, particularly the equity markets, should be left to their own devices because "the market" jointly knows better than the several rest of us, and the market is fair and efficient when we individuals are not. (Or, as my Doodoo economics rants pointed out, sometimes it is unfair and inefficient when we would prefer to be, but let's not beat dead horses.)

So, in our more polite moments we are all more than inclined to believe that all those "unsubstantiated" "rumours" are mere "conspiracy theories". And so they may be, at least until we find bullet, body and smoking gun with finger prints.

And so, I commend to those of you who need a daily dose of conspiracy theory to put you to sleep at night the following: "Government Intervention in Stock Market is Detailed by New Report" at http://biz.yahoo.com/bw/050906/65371.html Myself, I've given up on such theories, and sleep very well indeed without need of a daily dose of same, at least so long as that commie under my bed doesn't snore.

PS: If you want to see just how "out there" the conspiracy theories can get, see the site where I got that "market manipulation" image: http://cuttingedge.org/news/n1856.cfm