Fed Rigs Markets, Not the Flash Boys

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by Michael Pento

There’s been a lot of attention paid to high frequency trading (HFT) as of late. The question has been raised as to whether or not HFT rigs markets. It is true that HFT adds nothing to GDP and is simply a legalized form of high-tech front running. However, the real problem with the stock market — and the economy — as a whole isn’t the fact that HFT skims pennies off transactions from institutional traders; but rather that the Fed has rigged interest rates and asset prices to the extent that investors can no longer distinguish reality from fiction.

It is well known that the Fed has already purchased trillions of dollars’ worth of MBS and Treasuries since the start of the Great Recession. It is also no secret that the Fed Funds Rate has been pegged at zero percent since the end of 2008. Yet, somehow, this is not considered rigging the market. Nor do these conditions elicit the proper scrutiny of most investors, but instead, are nearly universally embraced as the perfunctory and necessary undertakings by a prudent central bank.

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