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Fed SOMA and The Economy- The Puppetmaster

It’s mind boggling to me, just mind boggling, how nobody gets the simplicity of the pipeline from Ben Bernanke’s twisted brain to his henchmen the Primary Dealers, to the stock market and the economy. When the Fed pumps money into Primary Dealer trading accounts, they manipulate stock prices higher. When stock prices go up, the top 1% is wealthier (or feels that way, even if it is just a false facade with no foundation) and spends more. That boosts economic activity at the margin. The mechanism is direct and immediate. And it works both ways. When the Fed reduced the SOMA in 2007 and 2008 to fund its myriad emergency alphabet soup programs, it crashed the stock market and the economy.

Fed SOMA, S&P500, GDP, Industrial Production, and Employment - Click to enlarge

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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