By MoneyMorning.com.au
This morning the Aussie market has taken off. Why? Because of this report from Bloomberg News:
“The euro rose after Italian daily La Stampa said the International Monetary Fund is preparing a 600-billion euro ($799 billion) loan for Italy in case the debt crisis worsens, without saying where it got the information.”
We’ve lost count how many rumours we’ve seen from European newspapers about bailouts that never happen – remember the China-buying-Italian bonds rumour?
As we see it, it’s another case of bureaucrats and central banks manipulating the market. Which is funny because…
In March 2008, the Australian Securities and Investments Commission (ASIC) clamped down on “rumourtrage”. That is, the spreading of false rumours “designed to harm a company, such as by forcing a share price down…”
In March 2010, ASIC put the campaign on ice… with only one prosecution.
Roll forward to today and we can see why the regulators have stopped targeting “rumourtrage”. Because the only false rumours investors get are from insiders keen to stop the markets falling.
But maybe Italy will get an IMF bailout. However, don’t think for a moment it’s the final fix the Europeans have waited for.
As you should have learnt by now, the fixing of one problem only creates another problem.
Glenn Stevens says useful economic forecasts require “an understanding of the dynamics of how economies typically behave.”
The reason central bankers interfere in markets is because they know how the markets would behave if they didn’t interfere. Ultimately it would mean the end of central banking.
That’s why you can be assured the bailouts and market manipulation will continue.
And why the RBA has things like the Committed Liquidity Facility and Residential Mortgage Backed Securities in place.
The central bankers have far too much skin in the game to allow anything else.
Cheers.
Kris.
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