The Biggest Wall Street Conspiracies
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The Biggest Wall Street Conspiracies
A field guide to wild and woolly financial theories.
By Gary Weiss
Posted Thursday, November 12, 2009 - 5:42pm
Once there was a simpler time, when pretty much everything that happened in the financial world had a straightforward explanation.
Take the crash of Oct. 19, 1987. In one day, the stock market lost more than one-fifth of its value. Back then there was considerable speculation about what caused the market to decline as much and as fast as it did. Something that most people never heard of (before or since) called “program trading” was widely blamed, and curbs were put in place. But very soon the nation moved on, the market rebounded, and the issue faded. Discussion of the causes of the crash was confined to presidential commissions and academics.
Today, of course, the market crash of 1987 seems like a happy interlude in comparison with the recent nightmare. With greater fear—reminiscent almost of the Red Scare of the 1950s—we’re seeing a rash of conspiracy theories.
It’s not surprising, really. In his 1963 essay “The Paranoid Style in American Politicians,” Richard Hofstadter marveled at the extent to which paranoia had become accepted part of the political dialogue. So it seems natural that paranoia has crept into the dialogue about the financial system as well.
As in all fields of conspiracy theorizing, there are two broad species of Wall Street conspiracy theories: the alternate history and the hidden factors.
Alternate history: One must not accept what they want you to believe. It’s far too easy to accept what they want you to believe about Sept. 11/the Holocaust/the Kennedy assassination. The truth that they don’t want you to believe is controlled demolition/it didn’t happen/Oswald was a patsy.
Hidden factors: It’s really happening and it’s all being hushed up. Area 51/the Trilateral Commission/a Masonic conspiracy.
But it’s not cut-and-dried. Maybe its agents didn’t kill Kennedy, but outlandish-sounding stories about the CIA turned out to be true. Time—sometimes a long time—either demolishes or substantiates conspiracy theories.
So here’s a field guide to the five most prevalent Wall Street conspiracy theories, with each one graded on scope, durability, crowd appeal, and plausibility and each graded on a sliding scale from 1 to 5, with 1 being “fugetaboutit” and 5 being “damn right.”
The Plunge Protection Team Manipulates the Markets
This is a classic conspiracy theory because it is grounded in fact. Yes, there really is a Plunge Protection Team, though it doesn’t go by that name. As revealed in a much-quoted Washington Post article from February 1997, the president’s Working Group on Financial Markets is poised to intervene in the event of a market calamity. “Plunge Protection Team” was coined by the Post, and it stuck. The article spawned a spasm of conspiracy theories that grind on to the current day, holding that the government actually does secretly intervene in the markets, buying equity index futures or, as Ron Paul recently asserted, has sought to depress the price of gold. But most of the braying about the PPT has been based on snippets of comments by public officials, and the actual evidence has been pretty much absent.
Category: Hidden factor
Scope: 4
Durability: 4
Crowd appeal: 3
Plausibility: 1
Wall Street Screws Consumers at the Gas Pumps
Wall Street speculation that drives up prices rarely gets the public too exercised—if the prices belong to stocks they’ve bought. But speculation that drives up the price of gasoline, heating oil, broiler chickens, and other commodities has consumers ready to march down from Trinity Church carrying pitchforks. So it was with the oil price spike of 2008. Surely there was a hidden hand there, no? After all, how was it that oil prices suddenly climbed? Didn’t make sense. Had to be nasty people on Wall Street doing that. Well, guess what? That’s exactly what happened. The Commodity Futures Trading Commission found that speculators did drive up the price of oil. So here’s a clear-cut example of how traders sitting behind terminals actually did screw ordinary people on the proverbial Main Street. That wasn’t their intent, but that’s what they did.
Category: Hidden factor
Scope: 5
Durability: 3
Crowd appeal: 5
Plausibility: 5
Photo of Wall Street sign by Getty Creative Images.
Comments
It goes deeper
I liked the snippet from the Gary Weiss book but i must say that his observations are just the tip of the proverbial iceberg. Wall Street is just a small part of the real conspiracy which takes place on the global stage and out of any real jurisdication.
Bottomline, as much as we suspect the vulnerabilites of the "random walk", there is little that can be donw about it. Human's have weaknesses and any human system will reflect that. But, the real fiancial conspiracy is not financial at all. It has much more to do with the coming Malthusian dilema that will force massive changes...and soon.
Len Goodman
author of The Meltdown Chronicles
Financial world has been
Financial world has been experiencing recession.We are at the stage of the recovery where confidence is important.The surprise on growth in the U.S. should have people a bit more optimistic.More experienced people are getting hired, and they're downgrading their skills to get the job.Apparently, too few new Bentleys were being seen at the administrative parking lot, and darn it, something had to be done! If a few people have to go on unemployment so that these Croesus wannabes can feel important, it's better to have more Microsoft layoffs than maybe some short term loans to keep the company afloat.