Do You Believe In The Plunge Protection Team?

originally posted by: khnum
a reply to: InachMarbank

Ill give you an example if someone say Russia was to send a cyberpacket to destroy Wall Street to stop it you would have to monitor banks and Wall Street in real time,which they do among many other things.

How would this for example cyberpacket destroy wall street?

originally posted by: AMPTAH

originally posted by: InachMarbank

You're joking right?

Say you've sworn to uphold the constitution.

And the stock market is about to crash.

You know that if it crashes, massive wealth will be wiped out, banks will fail, corporations will shut down,
and people will take to the streets to riot and protest. Unrest will spread all across the land.

What would you do?

Remember again, You've sworn to uphold the constitution.

If there's action that you can take to maintain national "tranquility" and the people's "welfare" you must take that action, because you've sworn to protect these things.

So, you press the PPT button, and viola, the stock market fall is halted.

By putting a "floor" on how low the stocks can fall, you maintain the SIX principles in the Constitution.

But why would a stock market crash cause such destruction?

A stock market crash wouldn't destroy any of the goods being produced by companies would it?

originally posted by: InachMarbank

But why would a stock market crash cause such destruction?

A stock market crash wouldn't destroy any of the goods being produced by companies would it?

Why would a company produce goods that nobody can buy?

Until we have robots doing all the manufacturing, people tend to walk off the job when they don't get paid.

In a stock market crash, people lose their fortunes, so they can't buy things. Corporate executives sit on top of worthless companies, so their incentives vanish, as all their stock options are worthless.

Money in the system evaporates, because loans are issued on collateral, which are based on market valuations.

All those pension funds, that have the old folks funds invested in the stock-market, go broke, and can't pay the pensioners their monthly checks.

At some point the government has to step in, and help.

When would you suggest the government start to help?

Or, should the government say, "Let's see how things play out? Leave it alone, and let the chips fall where they may."

Inevitably, things will stabilize after a period of time. But, in the mean time, there will be chaos, unless someone takes the reigns and moderates the transformations.

Sudden and abrupt changes in fortunes cause dismay, woe, chaos, and unrest.

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originally posted by: AMPTAH

originally posted by: InachMarbank

But why would a stock market crash cause such destruction?

A stock market crash wouldn't destroy any of the goods being produced by companies would it?

Why would a company produce goods that nobody can buy?

Until we have robots doing all the manufacturing, people tend to walk off the job when they don't get paid.

In a stock market crash, people lose their fortunes, so they can't buy things. Corporate executives sit on top of worthless companies, so their incentives vanish, as all their stock options are worthless.

Money in the system evaporates, because loans are issued on collateral, which are based on market valuations.

All those pension funds, that have the old folks funds invested in the stock-market, go broke, and can't pay the pensioners their monthly checks.

At some point the government has to step in, and help.

When would you suggest the government start to help?

Or, should the government say, "Let's see how things play out? Leave it alone, and let the chips fall where they may."

Inevitably, things will stabilize after a period of time. But, in the mean time, there will be chaos, unless someone takes the reigns and moderates the transformations.

Sudden and abrupt changes in fortunes cause dismay, woe, chaos, and unrest.

Ah ok... I think I see your point... And it seems like a pretty tough one for me to counter... But here goes...

First off, what is it that stocks are actually based on? The typical answer I hear is earnings, defined basically as revenue minus expenses.

I think most working people live paycheck to paycheck as it is, and most working people are not using stocks as collateral for loans to buy things.

And I think most of these working people account for most things being bought day to day.

But there may be many companies who have gotten loans based on their inflated stock prices; and lots of companies I think even got loans for the very purpose of inflating their stock prices (buying their own stock). If stock sellers were to suddenly overwhelm stock buyers, and drive down prices, across the board, then it is likely many companies would default on their loans.

What would happen then? Would the bank who loaned the company money seize the company's assets? What if the company is too big for the bank to handle, and the bank is also too big to get into the business of repossesing assets on a massive scale?

It becomes quite unclear who would be the winner and loser given the economy of scale here, huh?

My sense is the entire operation would be at a loss, and a creative solution would be needed.

Now circle back to the first question... What are stocks actually based on?

If you believe the government has a responsibility to act to prevent deflationary chaos, why didn't the government act earlier to prevent inflationary chaos?

If allowing deflation is a failure to uphold the constitution, then isn't allowing inflation also a failure to uphold the constitution?

If so, does this mean the government has failed to follow its own rules since its very inception?