THE 1978 DOLLAR INTERVENTION IN THE USDX
By Stephen Wellman
June 18, 2007
While testifying before Congress last year the US Federal Reserve Chairman, Ben Bernanke, was asked if the Plunge Protection Team(PPT) met on a daily basis. His reply was that he did not know and would try to find out. Then when pressed he admitted perhaps they met monthly ... Clearly it was a subject he wanted to avoid.
The PPT was established to intervene in various markets in the event of a crisis. It was established in the 1980s, but prior to the PPT there was the Exchange Stabilization Fund(ESF), which existed in the 1960s and was designed to intervene in foreign exchange markets to defend the US Dollar via intervention by the US Federal Reserve Bank and its "agent" banks.
In 1976 the US Dollar Index(USDX)was at 110 and by 1980 it plunged to 85. We face a similar scenario now only the USDX plunge began at 120 and hit as low as 80. Here is a chart showing the USDX from 1968 to 2006. You will notice that the USDX has been flirting with the "80" level since 1978. A very historically "psychological" support level. Look how many times the USDX bounced off "80" ... In 1978, 1991, 1993, 1995, 2005 and now in 2007 ...
Anybody who does not believe that there is intervention in "free markets" at all times needs to read the following excerpt from the FOMC meeting minutes dated Jan 5, 1978. Open talk about intervening on a daily basis is clearly debated. To sum up confidence in the US Federal Reserve even the Chairman back then used the word "LUCKY" !!! Being "lucky" is for gamblers in Las Vegas!
Here we have the US Federal Reserve documented in meeting minutes back in 1978 talking about intervening in the USDX on a daily basis. Their efforts are to intervene in a way that resembles "free markets". Laughable at the very least. This is conclusive proof of manipulated markets that dates back some 30 years, manipulations that occur on a frequent basis. The fact that Bernanke insists that the PPT does not meet every day is an out and out lie. Perhaps they skip a few days but the likelihood they only meet once a month,as he says, is truly very ridiculous.
Further, if you read the entire transcript you would see the word "psychological" mentioned a number of times. You would also see that the US Federal Reserve was spending billions of taxpayer funds to manipulate the USDX. Just imagine what amount they must be spending today to "manage" not only the USDX but all other markets including the DOW under the auspices of the PPT. Even with all this taxpayer money adding to market sizes and monetary inflation the performance over the past 30 years has been dismal based on what a US Dollar can purchase in 2007. It is clear to me that the US Federal Reserve in conjunction with the US Treasury has had a long and storied past of market manipulations. I have to question whether such manipulations have been worth the cost? Of course we will never know since there have never been "free markets" since the creation of the US Federal Reserve. One thing is clear ... we have had some 100 years of monetary inflation and the fact that I can no longer purchase any thing for a penny speaks volumes to the success of "fiat" monetary systems and the US Federal Reserve. We were warned over 200 years ago about printing money ... Now there is no turning back!!