Is FDI a clean fuel?

Is the Indian Government correct in recently allowing FDI Reforms based on Indo-US Trade Agreements under United States India Business Council (USIBC) recommendations?Let’s take a look at both sides of the debate.

First of all, the topic is quite intense and I need to take help of a few economic theories in this article. I have tried to eliminate most economic theories and formulae and tried to illustrate it in plain English wherever possible, but if the reader is not able to understand a particular concept, I request them to please skip that line and move forward and guarantee that you won’t miss the essence of article.

 Over time, and especially in the aftermath of the East Asian crisis of the late 1990s, it is almost universally believed that financial integration due to FDI has caused the crisis.

The FDI involves Phenomenon of “uphill flows of capital profits” from non-industrial to industrial countries and thus, I analyze here whether this pattern of capital flows has hurt growth in non-industrial economies.

Some analysis make it clear that non-industrial countries that have relied on foreign capital have not grown faster than those that have not relied on foreign capital.

Thus, surprisingly, I find that there is a positive correlation between current account balances and growth among non-industrial countries, implying that a reduced reliance on foreign capital is associated with higher growth.

Equally clearly, though, the reliance of these countries on domestic rather than foreign saving to finance investment comes at a cost which hampers the growth not only in that sector but other dependent sectors too in the long run.

But, this result is weaker when we use panel data rather than cross-sectional averages over longer periods of time, thus, in no case do we find any evidence that an increase in foreign capital inflows directly boosts growth.

But what is now the best policy towards capital account openness or FDI?

Certainly, the answer is not to go backward, but instead toward more context specificity in assessing the merits of capital account openness, and more flexibility and creativity in managing it.

Even the famous skeptical economist Keynes said, “Yet, at the same time, those who seek to dis-embarrass a country of its entanglements should be very slow and wary. It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction.”

He meant that even if a country is facing slow-down due to foreign money chains, they should not tear itself apart from the chain but try to manage it in a way that the benefit should reach all corners.

Then, what explains these results, which are contrary to the predictions of conventional theoretical models?

The truth is: even the successful developing countries have limited absorptive capacity for foreign resources, either because their financial markets are underdeveloped, or because their economies are prone to overvaluation (inflation) caused by rapid capital inflows.

Certainly, the role of foreign capital in expanding a country’s resource constraints may be limited. A more optimistic read would see a research and, eventually, policy agenda in determining how to increase the capacity of poor countries to absorb foreign capital.

As countries develop, absorptive capacity grows. The recent strong growth of the emerging economies of Europe, accompanied by rising current account deficits, probably has a lot to do with the strengthening of their financial sectors, in part through the entry of foreign banks. (Only time will tell what effects there are on the exchange rate and on competitiveness, as well as whether this phenomenon is sustainable, and so all conclusions from this episode have to be tentative.)

Development itself may be the antidote to the deleterious effects of foreign capital and may be necessary for countries to absorb more capital, only some forms of FDI may play a direct role in the development process.

How?

The level of financial integration, as measured by the stock of external liabilities to GDP, is not correlated with TFP (Total Factor Productivity) growth. But splitting up the stock of external liabilities reveals an interesting result.

FDI in equity inflows (cumulated over decade-long periods) contribute to TFP growth while FDI in debt inflows have the opposite effect.

But the negative effect of stocks of external debt liabilities on TFP is almost negligible in economies with better developed financial markets and better institutional quality.

In sum, the results suggest that insofar as the need to avoid overvaluation is important and the domestic financial sector is underdeveloped, greater caution toward certain forms of foreign capital inflows might be warranted. At the same time, however, financial openness may be needed to spur domestic financial development. This suggests that even though reformers in developing countries might want to wait to achieve a certain level of financial development before pushing for financial integration, the prospect of financial integration and ensuing competition may be needed to spur domestic financial development.

One approach worth considering might be a firm commitment to integrate financial markets at a definite future date; this would allow time for the domestic financial system to develop without possible adverse effects from capital inflows, even while giving participants the incentive to press for it by suspending the sword of future foreign competition over their heads.

In summary, using macroeconomic data bolsters the microeconomic evidence (based on firm- or industry-level data) that financial integration, especially if it takes the form of FDI or portfolio equity flows, leads to significant gains in efficiency and TFP growth.

Moreover, in tandem with the recent literature showing that TFP growth rather than factor accumulation is the key driver of long-term growth and thus, our results suggest that—despite all the scepticism surrounding it and despite all of the potential costs and risks associated with it— Capital account liberalization and FDI deserves a thumbs up.

Why does it look like someone is growing at a better speed than us?

First, why do you care? Just be happy that you are growing at a better rate than earlier.

But to answer the question, the industrial countries use the resources better than the non-industrial countries use that money. Thus, it has nothing to do with the FDI, it is just the use of money inefficiently, which can be overcome only via better technology and facility which comes hand in hand with FDI. 

Then why is anyone opposing FDI if its for the greater good in the long run?

Other than Political rivalry, there are a few other reasons for this:

1. Timing: The timing of the adjustment of TFP and output to greater financial integration is different. When the FDI is invested it takes at least 2-3 years to setup the business and promote and flourish. So is it the right time or should we wait?

2. Technology: TFP growth is often associated with the introduction of new technologies. Thus, if the said technology is a general purpose technology affecting a number of players in different sectors, this increases the rate of obsolescence of both physical and human capital of the players not using the technology and the benefits is reaped by a single player who has that technology. Thus, this could potentially slow down the growth rate of general output in the short run. Thus, it is hated by the persons who don’t want to upgrade themselves and don’t want the government to let others upgrade and take their position.

3. Unemployment: Financial openness might influence the reallocation of outputs and inputs (raw materials, land, skilled labour etc.) across individual players. Thus, affecting the return to capital, it could lead to changes in the entry and exit decisions of firms/plants. Thus, the older firms will have to either reinvent or leave their business due to low productivity. To the extent that this does not have a negative effect on net entry, aggregate factor productivity will increase because new plants are more productive than exiting older plants. This reallocation from less productive to more productive plants would ultimately increase total factor productivity. But on the assumption that the older plants who took exit were labour intensive and the newer plant were technology and machinery intensive thus, that leaves us with large scale unemployment in the short run.

4. Long run adjustment: There could be some adjustment costs that delay the realization of the positive effects of TFP on output growth in developing countries. As the adjustment of the capital stock to new technologies is completed, these effects are expected to disappear making the impact of financial openness on economic growth in the long run more visible. In light of the short history of the recent wave of financial globalization, which began in earnest only in the mid-1980s, perhaps it is easier to detect its positive effects on TFP growth than on output growth.

I would like to make a few quick summarizing points in simple words:

1. FDI brings new money into the Indian financial system. Trading within the family does not make a family richer because if one member is gaining then other is losing, thus overall the total money remains the same, but when a member earns from outside the family, the family prospers.

2. Better competition among the producers which make the goods and services cheaper for the ultimate consumers.

3. To bring in new or copyright protected or patented technology from outside, FDI is necessary to give the technology a perfect platform in the form of Investment to utilise the technology to its utmost potential. Developing countries need these technologies but people don’t have that kind of money required to make it commercial. Indian investors could be a substitute for these FDIs but the Indian counterpart does not have the risk appetite which the foreign counterpart has thus Indian investors restrain from investing, thus leaving FDIs the only option for growth.

4. Moreover, when the industries grow due to FDI the demand for raw materials and other primary sector goods increases exponentially. India being the boss in Primary sector with almost unlimited resources (when compared to other developing countries) is the best place where FDI should be encouraged.

Development via Fiscal Deficit Vs Economic Growth

Originally, the target was to bring down Indian fiscal deficit to 3.6 per cent of the GDP in 2015-16; but it has been postponed by a year. Now, government is targeting 3.9 per cent in the current fiscal. Thus, we have a lag of 1 year (no external growth in this whole year).

Ahead of the Budget, RBI governor Raghuram Rajan, warned against generating rural growth through additional debt saying that any deviation from the fiscal consolidation path will hurt stability of the economy.

Let me explain how this works:

1. Country has economic experts (govt. advisers), who calculate and formulate a "Path of Success" which is called "Fiscal plan". There are 3 types of such plan viz. Recovery, Consolidation and Aggressive Development.

2. As per the above plan, the Finance Ministry and RBI formulate government programs.

3. These govt. programs are announced in the Finance Budget every year with relevant facts and figures.

4. The Economists recheck their calculations and make proper adjustments so as to stay on the "Path of Success" and not deviate.








This year, every thing was smooth until the government announced a few aggressive developent plans. Finance Ministry aims at Higher Development and prosperity of people (like a younger brother), but this comes at a cost which is suffered by the Economy (family). Thus RBI (the elder brother) keeps a check on its functioning, which results in Sibling quarrels.
Now lets get back to the main story:



Now what is an Aggressive Development Plan?

1. Government has a fixed income by way of Taxes and other revenues, which is to be utilised for managing the govt. programs.

2. But, even if the Govt. don't have as much of revenue, it can take International Loans and finance these projects.

3. Now they need to be calculate that the Finance cost (interest) suffered by the Govt. is getting set off by the growth / income achieved by the country.

4. Generally, the Govt. programs are long term i.e. they take loan today but the returns are enjoyed after 3-5 years.

5. These projects which have too long payback period and huge current investment (that too Foreign loans) result in negative returns (due to time period, inflation, corruption, regulatory costs, policy flaws etc.), such a plan is known as Aggressive Development plan. Thus, this result in Fiscal deficit and not economic growth on paper.

There has to be a balance between Fiscal Deficit and Economic Growth, since Development does not directly result in Growth of economy, thus fiscal deficit driven Development is harmful for an Economy.


Recently the Indian Government took huge foreign loans to develop infrastructure (Metro rails, bullet trains, rural broadband, rural electrification (UDAY), and many more projects) this results in higher interest cost and no direct income flow in near future.

We can expect Metro and Bullet trains to generate some money (that too after a long period of time) but projects like UDAY are zero income generation projects.

Yes, the rural areas will be developed, better facilities, better infrastructure, but at a cost, which can not be recovered (plus, this plan was not a part of previous Finance Budget).

Thus, Economists (and RBI) are saying that, the returns enjoyed due to rural development is too costly for India specially when the world is experiencing a huge economic meltdown. Thus, as per the calculations, India has deviated from the well planned path and thus, Indian Fiscal Deficit (i.e. total Expenses incurred exceeds the total Income of the Government in 2015-16) which was supposed to be 3.6% of GDP, will be 3.9% of GDP and we will reach 3.6% by end of next year further 7th pay commission is to be introduced this year which is supposed to add further 0.65% of the GDP to the deficit. Thus, it is worth asking for loans only if there really are very high return on investments that we are foregoing by staying on the consolidation path, which is not the case here.

But, the Central Govt. looks at it with a different point of view:

1. If we always think that there is no economic benefit in rural development, then there wont be any rural development ever.

2. Indian economy is not in the recovery phase, but in consolidation phase, so we can afford the risk.

3. If government invests money, they grow by 7 % (GDP growth rate) but Indian Corporate grows at an average of around 25%

4. Thus, rather than Govt. keeping the money with itself, provide the Corporate Indian with such an infrastructure, that they can spread, and grow at even better rate.

5. Yes, we accept that we are late by a year, but the growth achieved after the development will be exponential (as compared to current rate).

6. This is the best time to take this risk as, world is experiencing economic meltdown, they don't have any other investment opportunity, thus, we get these loans at a cheaper rate.

I would like to conclude by pointing out that India is doing quite well, so it wont be a country which would face any Financial Apocalypse, thanks to its diversity and international relations, so these risks look planned. Further, inflation is already under check, so why worry about fiscal deficit?
But, you should not judge a student by his class tests, wait for the finale...

New Trojan - US Dollars

US Fed is Allegedly manipulating the World Economy

Note: The winter issue of Gerald Celente’s Trends Journal identifies financial market manipulation as a Top Trend for 2015.

A dangerous new trend is the successful manipulation of the financial markets by the Federal Reserve, other central banks, private banks, and the US Treasury. The Federal Reserve (Fed) reduced real interest rates on US government debt obligations first to zero and then pushed real interest rates into negative territory. Today the government charges you for the privilege of purchasing its bonds.

Indian Independence - Financial Strength

Indian financial markets and the economy are not immune to developments in the global economy. Therefore, if anything is unfavourable anywhere, we always have an impact here, but only in the short run.

However, at the fundamental level, India is at a comfortable position. Economic growth is picking up, inflation is falling after a long time, government finances are in a better shape and the external account is no longer a cause of concern. Therefore, it is being argued by money managers that once the dust settles, which could take its own time, India will once again emerge as an attractive investment destination.

US Fed (Federal Reserve) is Allegedly manipulating the US Economy, directly affecting World Economy 

Governments and economists take their hats off to free markets. Yet, the markets are rigged, not free. How long can stocks stay up in a lack-lustre or declining economy? How long can bonds pay negative real interest rates when debt and money are rising? How long can bullion prices be manipulated down when the world’s demand for gold exceeds the annual production?

For as long as governments and banks can rig the markets.

People pay to park their money in Treasury debt obligations; because they do not trust the banks and they know that the government can print the money to pay off the bonds. Today Treasury bond investors pay a fee in order to guarantee that they will receive the nominal face value (minus the fee) of their investment in government debt instruments.

The fee is paid in a premium, which raises the cost of the debt instrument above its face value and is paid again in accepting a negative rate of return, as the interest rate is less than the inflation rate.

US Economy Recovery

Think about this for a minute. Allegedly the US is experiencing economic recovery. Normally with rising economic activity interest rates rise as consumers and investors bid for credit. But not in this “recovery.”

Normally an economic recovery produces rising consumer spending, rising profits, and more investment. But what they are experiencing is flat and declining consumer spending as jobs are offshored and retail stores close. Profits result from labor cost savings from employee layoffs.

Then… Why is US stock market not falling?

The stock market is high because corporations are the biggest purchases of stock. Buying back their own stock supports or raises the share price, enabling executives and boards to sell their shares or cash in their options at a profitable price. The cash that Quantitative Easing has given to the mega-banks leaves ample room for speculating in stocks, thus pushing up the price despite the absence of fundamentals that would support a rising stock market.

In other words, in America today there are no free financial markets. The markets are rigged by the Federal Reserve’s Quantitative Easing (QE), by gold price manipulation, by the Treasury’s Plunge Protection Team and Exchange Stabilization Fund, and by the big private banks.

Allegedly, QE is over, but it is not. The Fed intends to roll over (re-issue/ renew and not pay back) the interest and principle from its bloated $4.5 trillion bond portfolio into purchases of more bonds, and the banks intend to fill in the gaps by using the $2.6 trillion in their cash on deposit with the Fed to purchase bonds. QE has morphed, not ended. The money the Fed paid the banks for bonds will now be used by the banks to support the bond price by purchasing bonds.

Then… Why is Dollar strengthening?

Normally when massive amounts of debt and money are created the currency collapses, but the dollar has been strengthening. The dollar gains strength from the rigging of the gold price in the futures market. The Federal Reserve’s agents, the bullion banks, print paper futures contracts representing many tonnes of gold and dump them them into the market during periods of light or nonexistent trading. This drives down the gold price despite rising demand for the physical metal. This manipulation is done in order to counteract the effect of the expansion of money and debt on the dollar’s exchange value. In other words, declining dollar price of gold makes the dollar look strong.

The dollar also gains the appearance of strength from debt monetization by the Bank of Japan and the European Central Bank. The Bank of Japan’s Quantitative Easing program is even larger than the Fed’s. Even Switzerland is rigging the price of the Swiss franc. Since all currencies are inflating, the dollar does not decline in exchange value.

As Japan is Washington’s vassal, it is conceivable that some of the money being printed by the Bank of Japan will be used to purchase US Treasuries, thus taking the place along with purchases by the large US banks of the Fed’s QE.

Then… How US GDP is increasing?

The government even manipulates economic statistics in order to paint a rosy economic picture that sustains economic confidence. GDP growth is exaggerated by understating inflation. High unemployment is swept under the table by not counting discouraged workers as unemployed. We are told US is enjoying economic recovery and have an improving housing market. Yet the facts are that almost half of 25 year old Americans have been forced to return to live with their parents, and 30% of 30 year olds are back with their parents. Since 2006 the home ownership rate of 30 year old Americans has collapsed.

Banking Casinos – Citi Group

The repeal of the Glass-Steagall Act during the Clinton regime allowed the big banks to gamble (tarde in Stocks) with their depositors’ money. The Dodd-Frank Act tried to stop some of this by requiring the banks-turned-gambling-casinos to carry on their gambling in subsidiaries with no access to deposits in the depository institution. If the banks gamble with depositors money, the banks’ losses are covered by FDIC, and in the case of bank failure, bail-in provisions could give the banks access to depositors’ funds. With the banks still protected by being “too big to fail,” whether Dodd-Frank would succeed in protecting depositors when a subsidiary’s failure pulls down the entire bank is unclear.

The sharp practices in which banks engage today are risky. Why gamble with their own money if they can gamble with depositors’ money. The banks led by Citigroup have lobbied hard to overturn the provision in Dodd-Frank that puts depositors’ money out of their reach as backup for certain types of troubled financial instruments, with apparently only Senator Elizabeth Warren and a few others opposing them. Senator Warren is outgunned as Citigroup controls the US Treasury and the Federal Reserve.

The falling oil price has brought concern that oil derivatives are in jeopardy. Citigroup has a provision in the Omnibus Appropriations Bill that shifts the liability for Citigroup’s credit default swaps to depositors and taxpayers. It was only six years ago that Citigroup was bailed out to the tune of a half trillion dollars. Already Citigroup is back for more while nothing whatsoever is done to bail the American people out of their hardships caused by Citigroup and the other financial gangsters.

GOLD

The price of gold is not determined in the physical market but in the futures market where contracts are settled in cash. If every time the demand for gold pushes up the price, the Federal Reserve or its bullion bank agents dump massive amounts of uncovered futures contracts in the futures market and drive down the price of gold, the result is to subsidize the gold purchases of Russia, China, and India. The artificially low gold price also artificially inflates the value of the US dollar.

BONDS

The Federal Reserve’s manipulation of the bond market has driven bond prices so high that purchasers receive a zero or negative return on their investment. At the present time fear of the safety of bank deposits makes people willing to pay a fee in order to have the protection of the government’s ability to print money in order to redeem its bonds. A number of events could end the tolerance of zero or negative real interest rates. The Federal Reserve’s policy has the bond market positioned for collapse.

US vs Russia - War on Economy

It is too risky for the US to take on Russia militarily. Instead, Washington is using its unique symbiotic relationship with Western financial institutions to attack an incautious Russia that foolishly opened herself to Western financial predation.

No country dependent on foreign capital is sovereign. A country dependent on foreign capital, especially from enemies seeking to subvert the economy, is subject to destabilizing currency and economic swings. Russia should self-finance. If Russia needs foreign capital, Russia should turn to its ally China. China has a stake in Russia’s strength as part of China’s protection from US aggression, whether economic or military.

If every time the stock market tries to correct and adjust to the real economic situation, the plunge protection team or some government “stabilization” entity (QE) stops the correction by purchasing S&P futures, unrealistic values are perpetuated.

The US government, perhaps surprised at the ease at which all financial markets can be rigged, is now rigging, or permitting large hedge funds and perhaps George Soros, to drive down the exchange value of the Russian ruble by massive short-selling in the currency market. On 15^th December 2015 the ruble was driven down 19%.

Just as there is no economic reason for the price of gold to decline in the futures market when the demand for physical gold is rising, there is no economic reason for the ruble to suddenly loose much of its exchange value. Unlike the US, which has a massive trade deficit, Russia has a trade surplus. Unlike the US economy, the Russian economy has not been off shored. Russia has just completed large energy and trade deals with China, Turkey, and India.

If economic forces were determining outcomes, it would be the dollar that is losing exchange value, not the ruble.

The illegal economic sanctions that Washington has decreed on Russia appear to be doing more harm to Europe and US energy companies than to Russia. The impact on Russia of the American attack on the ruble is unclear, as the suppression of the ruble’s value is artificial.

The American attack on the Ruble is also teaching sovereign governments that are not US vassals the extreme cost of allowing their currencies to trade in currency markets dominated by the US.

China should think twice before it allows full convertibility of its currency. Of course, the Chinese have a lot of dollar assets with which to defend their currency from attack, and the sale of the assets and use of the dollar proceeds to support the yuan could knock down the dollar’s exchange value and US bond prices and cause US interest rates and inflation to rise. Still, considering the gangster nature of financial markets in which the US is the heavy player, a country that permits free trading of its currency sets itself up for trouble.

Washington intends to subvert Russia and to turn Russia into a vassal state like Germany, France, Japan, Canada, Australia, the UK and Ukraine. If Russia is to survive, Putin must protect Russia from Western economic institutions and Western trained economists.

Conclusion

What we are experiencing is not a repeat of the past (2009). The government is supposed to be the enforcer of laws against market manipulation but is itself manipulating the markets. The ability or, rather, the audacity of the US government itself to manipulate the major financial markets is new. Can this new trend continue? 

Stock Market Manipulation - Types

A true history of Finance Fraud would have to start in 300 B.C., when a Greek merchant name Hegestratos took out a large insurance policy known as bottomry. Basically, the merchant borrows money and agrees to pay it back with interest when the cargo, in this case corn, is delivered. If the loan is not paid back, the lender can acquire the boat and its cargo.

Hegestratos planned to sink his empty boat, keep the loan and sell the corn. It didn't work out, and he drowned trying to escape his crew passengers when they caught him in the act. This is the first recorded incident as of yet, but it's safe to assume that fraud has been around since the dawn of commerce.

If you think investors are protected from all market manipulations by SEBI, RBI, Government and Stock Exchange Policies, they make a good team, but you live in a dreamland. Financial Market Manipulation, is the new trend and it takes a variety of forms, including:

·         Dark Pools: What is a dark pool? Institutions trading large blocks of stocks over the counter among themselves, out of public view. Investigating authorities say, that it is investigating to determine if dark pool activity detracts from the quality of publicly quoted prices of the stocks involved. There are agreements, often written, among group of traders to delegate authority to a single managing institution to trade in a specific stock for a specific period of time and then to share in the resulting profits or losses. It’s just like a Mutual fund, but without any governmental restrictions and without public knowledge.

·         Churning: When a trader places both buy and sell orders at about the same price and to prove the (undue) increase, the promoter advertises a possible future plan. The increase in activity is intended to attract additional investors and increase the price. In simple words, just by increasing the volume of trade (at the expense of brokerage) investors are manipulated to think that the increase in volume and price is due to the future plans of the company. There are different ways of Churning like, Ramping the market, Wash Trading

·         Stock Bashing: This scheme is usually orchestrated by savvy online message board posters (a.k.a. "Bashers") who make up false and/or misleading information about the target company in an attempt to get shares for a cheaper price. This activity, in most cases, is conducted by posting libellous posts on multiple public forums. The perpetrators sometimes work directly for unscrupulous Investor Relations firms who have convertible notes that convert for more shares the lower the bid or ask price is; thus the lower these Bashers can drive a stock price down by trying to convince shareholders they have bought a worthless security, the more shares the Investor Relations firm receives as compensation. Immediately after the stock conversion is complete and shares are issued to the Investor Relations firm, consultant, attorney or similar party, the basher/s then become friends of the company and move quickly to ensure they profit on a classic Pump & Dump scheme to liquidate their ill gotten shares (see P&D). Example: In January 2005, someone using the name “Rahodeb” went online to a Yahoo stock-market forum and posted this opinion: No company would want to buy Wild Oats Markets Inc., a natural-foods grocer, at its price then of about $8 a share.“Would Whole Foods buy OATS?” Rahodeb asked, using Wild Oats’ stock symbol. “Almost surely not at current prices. What would they gain? OATS locations are too small.” Rahodeb speculated that Wild Oats eventually would be sold after sliding into bankruptcy or when its stock fell below $5.
A month later, Rahodeb wrote that Wild Oats management “clearly doesn’t know what it is doing. . . . OATS has no value and no future.”The comments were typical of banter on Internet message boards for stocks, but the writer’s identity was Rahodeb, which was an online pseudonym of John Mackey, co-founder and chief executive of Whole Foods Market Inc. In 2007, his company agreed to buy Wild Oats for $565 million, or $18.50 a share.The company confirms, Mr. Mackey posted numerous messages on Yahoo Finance stock forums as Rahodeb. It’s an anagram of Deborah, Mr. Mackey’s wife’s name. Rahodeb cheered Whole Foods’ financial results, trumpeted his gains on the stock and bashed Wild Oats.

·         Pump and dump: This scheme is generally part of a more complex grand plan of market manipulation on the targeted security. The Perpetrators (Usually stock promoters) convince company affiliates and large position non-affiliates to release shares into a free trading status as "Payment" for services for promoting the security. Instead of putting out legitimate information about a company the promoter sends out bogus futuristic plans (the "Pump") to millions of unsophisticated investors (Sometimes called "Retail Investors") in an attempt to drive the price of the stock and volume to higher points. After they accomplish both, the promoter sells their shares (the "Dump") and the stock price falls like a stone, taking all the duped investors money with it. Example: A 15-year-old named Jonathan Lebed showed how easy it was to use the Internet, to run a successful pump and dump. Lebed bought penny stocks (stocks with negligible price) and then promoted them on message boards, pointing at the price increase. When other investors bought the stock, Lebed sold his for a profit, leaving the other investors holding the bag. He came to the attention of the U.S. Securities and Exchange Commission (SEC), which filed a civil suit against him alleging security manipulation. Lebed settled the charges by paying a fraction of his total gains. He neither admitted nor denied wrongdoing, but promised not to manipulate securities in the future.
Another example can be of Langbar International, Started as Crown Corporation, Langbar was the biggest pump and dump fraud on the Alternative Investment Market, part of the London Stock Exchange. The company was at one point valued greater than $1 billion, based on supposed bank deposits in Brazil which did not exist. None of the chief conspirators were convicted, although their whereabouts are known. A patsy who made a negligent false statement about the assets was convicted and banned from being a director.The investors who lost as much as £100 million sued one of the fraudsters and recovered £30 million.

·         Stock Runs: When a group of traders create activity, news or rumours (futuristic) in order to drive the price of a security up. An example is the famous Guinness share-trading fraud of the 1980s. In the US, this activity is usually referred to as painting the tape. Runs may also occur when trader(s) are attempting to drive the price of a certain share down, which is also referred to as Bear Raid, although this is rare (see Stock Bashing).

·         Lure and Squeeze: The way it works is a company is very distressed on paper, with impossibly high debt and consistently high annual losses, but very few assets, making it look as if bankruptcy must be imminent.
1)The stock price gradually falls as people new to the stock short it on the basis of the poor outlook for the company, until the number of shorted shares greatly exceeds the total number of shares that are not held by those aware of the lure and squeeze scheme (call them "people in the know").
2) In the meantime, people in the know increasingly purchase the stock as it drops to lower and lower prices.
3) When the short interest has reached a maximum, the company announces it has made a deal with its creditors to settle its loans in exchange for shares of stock (or some similar kind of arrangement that leverages the stock price to benefit the company), knowing that those who have short positions will be squeezed as the price of the stock sky-rockets.
4)Near its peak price, people in the know start to sell, and the price gradually falls back down again for the cycle to repeat.

·         Quote stuffing: This is a tactic employed by high-frequency traders that involves using specialized, high-bandwidth hardware to quickly enter and withdraw large quantities of orders in an attempt to flood the market, thereby gaining an advantage over slower market participants. Thus, you would observe greater deviation in stock prices in 1^st 10 mins and last 10 mins of the market.

·         Cornering (the market): Purchasing enough of a particular stock, commodity, or other asset to gain control of the supply and be able to set the price for it. This can be done by high net worth corporate or Dark Pool institutions, or to a stock whose market capitalization is low but number of shares is high. Example: During the financial crisis of 2007-2010, Porsche cornered the market in shares of Volkswagen, which briefly saw Volkswagen become the world's most valuable company. Porsche claimed that its actions were intended to gain control of Volkswagen rather than to manipulate the market. In this case, while cornering the market in Volkswagen shares, Porsche contracted with naked shorts resulting in a short squeeze on them. It was ultimately unsuccessful, leading to the resignation of Porsche's chief executive and financial director and to the merger of Porsche into Volkswagen. One of the wealthiest men in Germany's industry, Adolf Merckle, committed suicide after shorting Volkswagen shares.        

·         Insider Trading: When an insider, with important confidential information about a company, take advantage of that knowledge by buying or selling stocks himself, or informing or tipping someone else to make a profit or avoid losses. It is one of the easiest ways to make quick profits and thus you can find many examples online. Example: Martha Stewart: The Homemaking Hoaxer, R. Foster Winans: The Corruptible Columnist,  Levine, Siegel, Boesky and Milken: The Precognition Rat Pack.

      Market Manipulation is nothing but an unfortunate fact of the financial market. Stocks and commodities have always been subject to manipulation, whether by individuals, pools, central banks or even governments. If you are unable to come to terms with this reality then it’s best to avoid participating in the market altogether. But if you’re able to come to grips with this then there is money to be made once you’re able to spot the tell-tale signs of manipulation, a skill which becomes better with experience.

Facts, Figures, Accusations and are taken from Wikipedia and Investopedia.