Have the recent movements in stock, bond and currency markets been solely the result of QE2, or has the Fed been flogging the markets in a more direct way to make its quantitative easing program look successful? We soon may know. New York Post columnist John Crudele reports that the neocon tabloid is putting together a new FOIA request for the Fed’s trading records that will reveal which markets it has recently intervened in directly or through surrogates. As Crudele points out, “The stock market, in particular, has been suspiciously calm lately despite nuclear disasters, widening unrest in the Middle East, rising inflation, lower economic expectations and sovereign debt fiascoes in Europe.” Given the public outrage over the recent revelation of the gobs of taxpayer-guaranteed loans that the Fed shoveled out the discount window into foreign institutions, it is going to be interesting to see if the Fed has the gall to oppose a FOIA request again in court. However, if the Fed is manipulating stock and bond prices, it would be difficult to believe that it would not fight the request with all the resources at its command. Whatever strategy the Fed adopts in dealing with the request, it can only help the campaign to audit the Fed.
In the same column, Crudele looks forward to getting a peek at the most recent schedule of New York Fed President William Dudley, which is soon to be posted. It seems that Bill Dudley’s January schedule revealed that he had been meeting with selected outsiders during the Fed’s so-called “blackout period” leading up to FOMC meetings. During the this period Fed officials are supposed to maintain a low profile to avoid (the perception of) passing on information about likely policy moves that might provide profitable trading opportunities for friends, associates and, of course, future employers in the private sector. Dudley’s behavior betrays either sheer studpidity or the overweening arrogance of power or both.
As Murray Rothbard used to point out, the ruling elite that controls any State, democratic or otherwise, always has a very tenuous grip on power supported ultimately only by a false ideology designed to veil its true nature and intentions. One false move or random event may cause the ideological curtain to flutter back and reveal the self-serving knaves and dolts trying to operate the creaky and unstable institutions of the mighty State. The Fed, with a rigid and bumbling academic and political naif as its Chairman, may just have set the curtain afluttering.