Monday, May 8, 2017

High Plateau Drifter - May 8, 2017

Help me out! So here we have the Swiss National Bank acquiring 63.4 Billions in US stocks.

But what in the world is a national bank going to do with common stocks? We know that purchasing corporate stocks will tend to prop up stock prices. So what happens when they stop buying? Are they going to sell them at some point and thus depress stock prices?

And how is the purchase of corporate stock by a national bank any different than a government financed stock buy back? Does it benefit anyone other than the shareholders of that corporation? Where is the public or governmental benefit in such a transaction?

As we all know, when a central bank issues new currency to purchase sovereign debt, the debt is kept on the central bank's books as a fig leaf to cover the genital warts of otherwise naked money printing. Of course we also know that a central bank with the power to create new money could simply cancel the sovereign debt it has purchased at any time, relieving the government of any obligation of repayment, and without material consequence to its mission, other than the inflationary optics created by removal of the fig leaf in proportion to the amount of the sovereign debt cancelled.

Is the Swiss National Bank going to vote these shares? Elect directors? The U.S. Federal Reserve is prevented by law from purchasing stock of private corporations. Is the Swiss National Bank making these purchases at the request of and for the benefit of the U.S. Fed?

And once the crack cocaine of Central Bank money printing is used for propping up stock prices, won't the bear market which follows when the printing stops be that much worse?
Remember how central banks sold gold at the lows 15-20 years ago? Won't it be perfect if they sell these stock portfolios at the next low?

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