Critical Observer

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<span style="color: #333333; font-family: inherit; font-size: small; font-weight: normal; line-height: 1.1;">A "crash" engineered to set up a buying opportunity for insiders. </span><span style="color: #333333; font-family: inherit; font-size: small; font-weight: normal; line-height: 1.1;">Take your pick–here’s three good reasons to engineer a “crash” that benefits the few at the expense of the many.</span></h2>
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<span style="font-family: inherit;"><span style="box-sizing: border-box;">There is an almost touching faith that markets are rigged when they loft higher, but unrigged when they crash. Who’s to say this crash isn’t rigged?</span> A few things about this “crash” (11% decline from all time highs now qualifies as a “crash”) don’t pass the sniff test.</span></div>
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<span style="font-family: inherit;"><span style="box-sizing: border-box;">Exhibit 1: VIX volatility Index soars to “the world is ending” levels when the S&P 500 drops a relatively modest 11%.</span> The VIX above 50 is historically associated with declines of 20% or more–double the current drop.</span></div>
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<span style="font-family: inherit;">When the VIX spiked above 50 in 2008, the market ended up down 57%. Now that’s a crash.</span></div>
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<span style="font-family: inherit;"><span style="box-sizing: border-box;">Exhibit 2: The VIX soared and the market cratered at the end of options expiration week (OEX), maximizing pain for the majority of punters.</span> Generally speaking, OEX weeks are up. The exceptions are <em style="box-sizing: border-box;">out of the blue lightning bolts</em> such as the collapse of a major investment bank.</span></div>
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<span style="font-family: inherit;">Was a modest devaluation in China’s yuan really that unexpected, given the yuan’s peg to the U.S. dollar which has risen 20% in the past year? Sorry, that doesn’t pass the sniff test.</span></div>
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<span style="font-family: inherit;"><span style="box-sizing: border-box;">Exhibit 3: When the VIX spiked above 30 in October 2014, signaling panic, the Federal Reserve unleashed the <em style="box-sizing: border-box;">Bullard Put</em></span>, i.e. the Fed’s willingness to unleash stimulus in the form of QE 4. Markets reversed sharply and the VIX collapsed.</span></div>
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<span style="font-family: inherit;">Now the VIX tops 50 and the Federal Reserve issues an absurd statement that it doesn’t respond to equity markets. Well then what was the Bullard Put in October, 2014? Mere coincidence? Sorry, that doesn’t pass the sniff test.</span></div>
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<span style="box-sizing: border-box;"><span style="font-family: inherit;">Why would “somebody” engineer a mini-crash and send volatility to “the world is ending” levels? There are a couple of possibilities.</span></span></div>
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<span style="font-family: inherit;"><span style="box-sizing: border-box;">1. The Shock Doctrine.</span> Naomi Klein’s landmark study of how manufactured crises are used to justify further consolidation of power, <a href="http://www.amazon.com/gp/product/0312427999/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0312427999&linkCode=as2&tag=charleshughsm-20&linkId=I4KL3RWE6AJIZ227" style="background: transparent; border: none; box-sizing: border-box; color: #025ab4; outline: none; text-decoration: none;" target="_blank">The Shock Doctrine: The Rise of Disaster Capitalism</a>, provides a blueprint for how financial crises set the stage for policies that extend the power of central and private banks and various state-private sector players.</span></div>
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<span style="font-family: inherit;">A soaring VIX and sudden crash certainly softens up the system for the next policy squeeze.</span></div>
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<span style="font-family: inherit;"><span style="box-sizing: border-box;">2. A “crash” engineered to set up a buying opportunity for insiders.</span> When easy gains get scarce, what better way to skim a quick 10% than engineer a “crash,” scoop up shares dumped by panicked punters and momo-following HFT bots spooked by “the world is ending” VIX spike, and then reverse the “crash” with another round of happy talk?</span></div>
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<span style="font-family: inherit;"><span style="box-sizing: border-box;">3. Settling conflicts within the Deep State.</span> I have covered the Deep State for years, in a variety of contexts–for example:</span></div>
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<span style="font-family: inherit;"><a href="http://www.oftwominds.com/blogmar14/disunity-deep-state3-14.html" style="background: transparent; border: none; box-sizing: border-box; color: #025ab4; outline: none; text-decoration: none;" target="_blank">Is the Deep State Fracturing into Disunity?</a> (March 14, 2014)</span></div>
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<span style="font-family: inherit;"><a href="http://www.oftwominds.com/blogfeb14/dollar-deep-state2-14.html" style="background: transparent; border: none; box-sizing: border-box; color: #025ab4; outline: none; text-decoration: none;" target="_blank">The Dollar and the Deep State</a> (February 24, 2014)</span></div>
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<span style="font-family: inherit;"><a href="http://www.oftwominds.com/blogmay15/surplus-repression5-15.html" style="background: transparent; border: none; box-sizing: border-box; color: #025ab4; outline: none; text-decoration: none;" target="_blank">Surplus Repression and the Self-Defeating Deep State</a> (May 26, 2015)</span></div>
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<span style="font-family: inherit;">Without going into details that deserve a separate essay, we can speculate that key power centers with the Deep State have profoundly different views about Imperial priorities.</span></div>
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<span style="font-family: inherit;">One nexus of power engineers a trumped-up financial crisis (i.e. a convenient “crash”) to force the hand of opposing power centers. As I have speculated here before, the rising U.S. dollar is anathema to Wall Street and its apparatchiks, while a rising USD is the cat’s meow to those with a longer and more strategic view of dollar hegemony.</span></div>
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<span style="box-sizing: border-box;"><span style="font-family: inherit;">Take your pick–here’s three good reasons to engineer a “crash” that benefits the few at the expense of the many.</span></span></div>
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<span style="font-family: inherit;"><i style="box-sizing: border-box; line-height: 25.7142868041992px;">by</i><span style="line-height: 25.7142868041992px;"> </span><span style="box-sizing: border-box; line-height: 25.7142868041992px; text-transform: uppercase;">CHARLES HUGH SMITH | <a href="http://charleshughsmith.blogspot.com/2015/08/what-if-crash-is-as-rigged-as.html" style="background: transparent; border: none; box-sizing: border-box; color: black; outline: none; text-decoration: none;" target="_blank">OF TWO MINDS</a> </span><span style="line-height: 25.7142868041992px;">| </span><span style="box-sizing: border-box; line-height: 25.7142868041992px; text-transform: uppercase;">AUGUST 27, 2015</span></span></div>

WHAT IF THE “ECONOMIC COLLAPSE” IS AS RIGGED AS EVERYTHING ELSE?

A "crash" engineered to set up a buying opportunity for insiders. Take your pick–here’s three good reasons to engineer a “cras...

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