October 29, 2014 – QE is dead. Long live QE. Everybody knew that the Fed would announce quantitative easing was ending. Nevertheless, the stock market dropped 100 points and quickly recovered, down only 31 points for the day.

The Fed did plenty to alert the stock market players that though they are at least for now discontinuing buying long-term bonds, don’t fret. The Fed has no interest in raising interest rates. They may be suspending the purchase of long bonds, but to keep interest rates from rising they will have to buy something else.

The Fed is the key player of the “plunge protection team,” or more correctly called the president’s working group on financial markets. Its job is to keep stocks from plunging. No more stock market crashes is their goal. Members of the president’s working group to prevent radical drops in stock prices include not only the Fed but the SEC (Securities and Exchange Commission), the Secretary of the Treasury, and the chairman of the CFTC (Commodity Futures Trading Commission). With the financial wherewithal of this group, a lot of mischief can be accomplished in bailing out and protecting their Wall Street friends.

Dealing in stocks, bonds, futures and options with no accountability of losses gives the plunge protection team a lot of tools for propping up the market. And the Fed also has the ability to endlessly create credit and let friends in other central banks and foreign banks participate in the game of protecting the stock market no matter what.

Though the end to this charade is not near, the process of endless credit to keep the bubbles inflated forever always end badly. Even with a secret quantitative easing program or an announced new one, the deeply flawed financial system however is destined to collapse.

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