Government manipulation controlling this market

[DRumsfeld2000]

Pathetic really. So much for an homogeneous market!


http://www.businessinsider.com/robin...ths-ppt-2010-9

[pescamaaan]

Re: Government manipulation controlling this market

i'm confused by POMO and how banks are "putting cash back in the markets"

POMO suggests
1. bank has deposits.
2. bank uses deposits to purchase treasuries (from the banks perspective: cash out, bonds in)
3. Fed buys said treasuries in the open market (POMO) from said banks (from the banks perspective: cash in, bonds out)
4. if the banks already have the cash from deposits, why go through this buy/sell treasuries to raise cash??

also, the power of the money multiplier only really comes into effect if the banks are lending out their deposits - we hear time and time again that banks are not loaning money. if that's the case, then banks are just sitting on cash in the form of deposits - i guess i don't see the connection to POMO and speculation. they already have the deposits. i could see how they would be incentivized to buy 30yr notes and earn 300 basis points on the spread (they're effectively paying 0% on their deposits). why would they then trade in those bonds for cash to speculate in the equity markets??

finally, algorithms only buy? wasn't it Mr Saluzzi saying that it was the algos that were massively shorting and depressing prices back in 2008??