The Plunge Protection Team or PPT for short, is a theory that many experienced traders will talk about from time to time. This theory got its start after the single biggest one day trouncing of the US stock market back in October 1987 when stocks lost 23% of their value in a single day. From the very next day, the stock market began a quick recovery and within only a few weeks, the devastating crash was quickly forgotten. The theory was that the US central bank (the Federal Reserve) intervened in the markets using their close ties to well established Wall Street investment firms to prop up stocks.
Since that time, there have been other calamities such as the 1997 Emerging Market crisis and the 1998 Long Term Capital Management crisis, as well as the after effects of the 2000 Tech Wreck and the 2008 Financial Crisis. After each of these events, and other lesser known ones in between, the assumption among many traders was that the Federal Reserve (“the Fed”) had intervened in some way to support the markets when buyers disappeared.
Recently, someone raised the question on the Ace Talking Stocks forum (simply google “Talking Stocks” to find it) if there was any evidence to suggest that the PPT is still in existence?
I responded that I believe that the Plunge Protection Team has gone global. By that, I mean that the global elites of the largest economies work together to coordinate PPT activities as needed around the world (those being the US, China, Japan and Europe). It is not just a US phenomenon any more, but a truly coordinated, global effort. The vehicle they use to implement PPT policies is mostly in manipulation of currencies.
For example, China was on the verge of breakdown back in early February with its high debt, and its currency on the brink of a large devaluation…. and the global elites got together and decided they would let the Yen and Euro go higher and let the US dollar fall, because the Yuan is pegged to the dollar. By letting the $ fall, it would also allow the Yuan to devalue against most currencies without actually doing an official devaluation.
In other words, a sleight-of-hand was pulled off by the global elites. With a falling dollar, the commodities have come roaring back, the Yuan has stabilized, and bond prices in high yield debt have stabilized. My guess is that the global elites will do a reversal in June when the Brexit issue comes to the fore. Then, they will let the Euro drop and the US $ will climb again–at least gradually–so that they don’t de-stabilize the recovery in China.
Actually, this isn’t my theory; I got the idea from a video by economist Jim Rickards, whose circle of friends includes many of the global elites. He put forth the idea that the G-7 and G-20 countries under the leadership of IMF Director Christine Lagarde are working together to re-direct the currency wars into currency cooperation in order to keep the global economy stable. All I have done really is to suggest that this coordinated effort is an extension of the PPT theory to one of a global scale effort.
That’s the grand plan, at least. Yet, I would also argue that the Elites don’t have full control of the situation due to all the calamities that are going on. How long can they keep moving to put out one fire when that starts a new fire somewhere else? The situation in Japan is growing more worrisome with their large debt and a strong Yen…even the US is not immune with its slowing economy. How many fires can they put out when the problem is out of control debt in nearly every corner of the globe? Like several small fires in a large forest that at some point become too difficult to control, the fires can come together to form one large conflagration that destroys all of the forest.
Is it any wonder that Gold and Silver are on the rise again? These two metals seem to be re-asserting themselves as alternative currencies. Unlike the fiat currencies which the global Elites attempt to manipulate, the precious metals are becoming more immune from their control as investors flock to these alternative currencies of gold, silver and platinum.