The PPT consists "officially" of The Secretary of the Treasury, or his/her designee (as Chairperson of the Working Group); The Chairperson of the Board of Governors of the Federal Reserve System, or his/her designee; The Chairperson of the Securities and Exchange Commission, or his/her designee; and the Chairperson of the Commodity Futures Trading Commission, or his/her designee.
While many would say the actual execution of actions of the PPT are nothing more than traders based out of the 9th floor of the New York Federal Reserve at 33 Liberty street, otherwise known as the "Open Market Operations Team", this however grew out of a much earlier iteration from the F_E_D itself just after WWI as then chairman, Benjamin Strong first presented findings of the power of Open Market Operations to the committee during the December 19th, 1923 meeting. Hoping to show that these open market operations could support the expansion of multiple deposits and credits in the monetary system. Out of these operations at the N.Y. F_E_D, the "Open Market Investment Committee" was formed in early 1923, one of the prequels of Quantitative easing and many other F_E_D policy tools.
Strong was more influential than most realize, quote on quote, "In 1922, Strong unofficially scrapped the gold standard and instead began aggressively pursuing open market operations as a means of stabilizing domestic prices and thus internal economic stability. Thus, he began the Federal Reserve’s practice of buying and selling government securities as monetary policy. John Maynard Keynes, a prominent British economist who had previously not questioned the gold standard, used Strong's activities as an example of how a central bank could manage a nation's economy without the gold standard in his book "A Tract on Monetary Reform" (1923). To quote one authority, "It was Strong more than anyone else who invented the modern central banker. His policy of maintaining price levels during the 1920s through open market operation and his willingness to maintain the liquidity of banks during panics have been praised by monetarists and harshly criticized by Austrian economists.
However, Strong dies in 1928 before seeing what his monetary experiment that led to the "Roaring 20's turned out, just about a year later, the Crash of 1929 and the Great Depression.
I think by now it's fairly clear that Central banker over-tinkering has never been an effective method of growing the economy in a sustainable way, if it was, Bernanke, an avid student of Strong's policies probably would not have had to reach much beyond QE1.
While this is just my opinion, I think the real unemployment rate in the economy is indicative of the failure QE has actually been. From a Forbes August 20th , 2014 article,
"Despite the significant decrease in the official U.S. Bureau of Labor Statistics (BLS) unemployment rate, the real unemployment rate is over double that at 12.6%. This number reflects the government’s “U-6” report, which accounts for the full unemployment picture including those “marginally attached to the labor force,” plus those “employed part time for economic reasons.”
The U2 Rate is the headline unemployment rate, however it is not indicative of the real unemployment rate; U6, while not a complete measure is a better measure of those who would like to work or work more, but can't who are unaccounted for in the headline unemployment rate; not to mention the magic of lowering the employment rate by slashing the workforce pool/size which is simply a matter of one's status in the unemployment benefit system.
None of this is really the point though, the point is simply it is my belief that QE has been nothing more than a stealth bailout of the US and to an extent, the global banking system. You may remember the early days of bailouts in 2008 such as AIG and GM and you probably recall how deeply unpopular they were with the voting public. Thus QE, which saw investment banks report earnings that showed an entire quarters without a single day of trading losses was a perfect mechanism that few could understand to transfer risk from bank's balance sheets to the F_E_D's and to put substantial cash in the system in which the banks would make fortunes off of, thus a "Stealth Bailout" that was "officially" for the economy's benefit as far as mainstream Americans understood. Although it had little effect for the near $4 trillion in balance sheet expansion since 2008, I'd say it certainly provided plenty of liquidity and profits for banks, just like Strong did in the early 1920's.
Until recently, the F_E_D's actions or the Plunge Protection Team's actions have always been assumed to be to ramp the market higher, yet that doesn't explain multiple bear markets such as the Tech bubble or the Sub-prime housing bubble. I suspect bear markets are simply part of the wealth transmission mechanism known as the business cycle, therefore it would not be such a stretch to imagine that the PPT does more than just ramp the market higher.
Interestingly, 2014 has given us many examples of F_E_D speakers coming out with contradictory and sometimes outright ridiculous statements that either lifted or suppressed the market or certain assets like the $USD, but none has been more apparent than the recent comments by one James Bullard, CEO of the St. Louis Federal Reserve.
If a picture is worth a thousand words, than maybe this chart will save me several hundred...Bullard's comments and the recent effect on the Dow Industrials...
After a significant rally, on November 4th only 3 weeks later Bullard changes tune again saying the economy is in good shape and there's no need for more QE. Did the economy really change that much in 3 weeks?
Today Bullard is back at it seeing the last two times he came out he was market moving, but his last jawbone attempt failed to move the market lower so he doubled down today saying, inflation expectations have rebounded since mid October and rates are to be raised in 2015, of course "Data dependent".
Have inflation expectations rebounded? You be the judge...
However, what we do know, is that Institutional money, investment banks and such that have clearly had balance sheet issues (recall the record use of the F_E_D's 1-day reverse repo facility on the last day of Q3 window dressing on Sept. 30th and the second highest use ever at the end of April window dressing - April 30th). Apparently banks are still in trouble.
We know professional traders don't just buy long, they go short, that's essentially the definition or main difference between a mutual fund and a hedge fund.
These are just a few charts ALL published here from October 13th, the day before Bullard's comments, as we were making the case for a strong rally ahead...
High Yield Credit leading the SPX in a positive divergence, another telling leading indicator making the case for a strong upside rally to come shortly on October 13th.
It's hard not to think that Bullard's comments, once smart money was already in place, weren't a momentum boost to get the rally going along with William's on the same day.
And now...
After all of the leading indicators you've seen and divergences such as this...
There are dozens upon dozens of these charts now supporting a move down along with Bullard's comments just as there were dozens upon dozens of charts before the October lows and days before Bullard's market ramping comments.
It's hard not to think that while QE may be gone, the F_E_D is still out there making sure institutional money is on the right side of the trade, the stealth bank bailout continues via the F_E_D.
