http://charleshughsmith.blogspot.com/2021/02/trapped.html
The first market shadow nationalized was the mortgage market, the foundation of the housing market. After Wall Street’s epic swindle (subprime mortgages) imploded in 2008, the Fed printed trillions of dollars out of thin air and bought hundreds of billions of dollars in mortgages. The federal government nationalized the quasi-governmental mortgage issuers Fannie Mae and Freddie Mac, and the net result was virtually the entire mortgage market was government guaranteed or owned.
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Since Wall Street’s fraud had nearly vaporized the entire global financial system, the Fed also shadow nationalized the stock market, which had imploded once the house of cards collapsed. Thus the S&P 500 has advanced from 667 to 3,850 with just enough brief wobbles to maintain the semblance of an organic market.
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Now the Fed is in the process of shadow nationalizing the entire bond market. It signaled its intent long ago with quantitative easing, i.e. strangling price discovery in the Treasury market, and recently it began buying corporate bonds (proxies come in handy here).
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But that will release rogue waves of unintended consequences that will sink the Fed and the economy. Kill authentic price discovery, you also kill markets, and in killing markets, you kill allocation of capital and risk management, and in killing those, you kill the economy.