$8.53 Trillion And Counting—How The Fed Butchered The Stock Market

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The number of the day at the cross-roads of Sesame & Wall streets is $8.53 trillion. It represents the cumulative “negative issuance” of equity shares on Wall Street since 1996, and thereby represents a financial world made upside-down by Washington and especially its central banking branch.

For crying out loud. The fundamental function of the stock market is to raise new equity capital for aspiring businesses wishing to fund growth, new equipment, new technologies or new business operating models.

Yet for the last three decades the stock market has been an equity liquidation machine. That is, a place where the boys and girls who gamble down there could do so on higher and higher amounts of cheaper and cheaper leverage, knowing that share prices were backstopped by a massive and continuous bid from the companies that had issued them.

Needless to say, the stock market became inherently rigged by an SEC rules change in the early 1980 done in the name of “deregulation”. It created a “safe harbor” (Rule 10b-18) for companies to buyback their own shares without running the risk of being sued by the SEC or private litigants for stock price manipulation.