Primary Dealers – the Truth About Their Iron Grip

FedRes-NYC

QUESTION: 

Martin,

On Page A11 of the IBD today (5/29) a statement was made that seems to fit your claims.  It is something that having been in the business for 24 years I was unaware of.  The entire article is actually quite interesting.

Please clarify the following, made in the 4th paragraph;

…..BNP Paribas in New York, one of 21 Primary dealers that are obligated to bid at U.S. Government debt offerings.

Is this factual???

Are they “obligated”?

Will they be “obligated” when government debt is in free-fall?

You have become my primary source for applying history in today’s world and common sense thinking globally.

I often try to tell my 14 yr old son…if you listen- you can take advantage of the ACCUMULATED wisdom of your grandparents knowledge passed onto me, and my knowledge passed onto you, to learn life lessons  You have to be able to put your ego aside and learn…you have 70-100 years of life’s experience to take advantage of. Not many 14 year old boys are capable of grasping that, and if you can, you are way ahead of the game.

I feel this way about the information you are passing onto us….it is decades of accumulated knowledge, experience and wisdom that no single person could ever duplicate on their own…for this I thank you!!!

ANSWER: True. This is why I say the banks are able to threaten the government if they are not bailed out, the government cannot sell its debt. That is NOT saying Paribas does that. It is the big US Investment banks. The Treasury has Primary Dealers. They must buy the debt and then they resell it. This is how Salomon Brothers manipulated the Treasury Auctions. ONLY a Primary Dealer bids. You give your bid to them and they buy from the Treasury. This is why I have also been blamed advising that China should buy directly and indeed they informed the US they would no longer go to a Primary Dealer where the game is rigged.

This is why there will be NO HYPERINFLATION! The bankers dictate policy. You raise taxes and defend the value of bonds or we exit the market and the government is dead. It would be like all the branches of Starbucks suddenly refused to sell coffee. What would the company do? How could it survive? That is the real power of New York. It is why they are the UNTOUCHABLES. It is why no court in NY will allow you to sue them no matter what they do. So to those that think the government will print to meet obligation rather than find excuses not to do so, wake up to the real world of finance. These are the people who are in control because the government is broke without them. This is why they accused me of instigating China to refuse to deal with them. I do not care. Nobody should go through a Primary Dealer. That will end their iron-grip over fiscal policy and the new hunt for capital and taxes.

The NY Federal Reserve states:

“Primary dealers serve as trading counterparties of the New York Fed in its implementation of monetary policy. This role includes the obligations to: (i) participate consistently in open market operations to carry out U.S. monetary policy pursuant to the direction of the Federal Open Market Committee (FOMC); and (ii) provide the New York Fed’s trading desk with market information and analysis helpful in the formulation and implementation of monetary policy. Primary dealers are also required to participate in all auctions of U.S. government debt and to make reasonable markets for the New York Fed when it transacts on behalf of its foreign official account-holders.”