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Fed tapers: $10B reduction in purchases
Topic Started: 19 Dec 2013, 06:14 AM (4,058 Views)
MMM
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I am surprised they have tapered now. If you had of asked me a couple of days ago if I thought there would be a tapper in December , I would; of said no, and would of rated it about 10% chance. The main reasons being that its holiday time , Xmas in a week and I thought if they did taper it might start them off on the wrong foot to begin 2014.

Some have said they are surprised at the market reaction and even more so , the price of gold. They both did not do much at all .

Buts let step back and look at the bigger picture here. The taper has only been reduced by around 10% , 5 billion in mortgage backed securities and 5 billion in treasury bonds. The market has been pricing in this possibility with all the non stop talk, people are becoming desensitised and nothing really shocks them anymore. Its not like they cut the stimulus in half or reduced it in any major way.

So this mediocre taper is telling the people a few things, it tells them that the fed is not very confident with the market to taper in any meaningful way, it tells them they are still going into debt at the tune of 75 billion a month . Its almost like a dummy taper, a claytons taper, to see what the market would do. And 85 billion a mth was too much to start with. I have always said that they started of with too much stimulus which would mean they could cut some back later to make it look like things were getting better when they were not, a way to fool and trick people,

On the other hand, I could say it was needed now, the stock market has returned and exceeded to pre gfc level highs and is now overbought.But these current prices are the result of inflation within the stock marketas that is where the stimulus has been directed, it was not directed into the economy, it was directed into the stock market and housing market, so inflation has not showed up in the economy yet , only in the stock market and housing markets. So even though there has now been a taper, a dummy taper, a fools taper, the people don't seem to be fooled .People know that if they were to taper in any meaningful way, things would collapse.
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Count du Monet
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I'd take anything the FED says with a packet of salt.

The FED and the ECB control most of the worlds international monetary reserves with the FED being 2/3 rds and the ECB being 1/3.

The ECB has spent the last 12 months gutting QE......something amazingly ignored by the media.

The FED is saying they are slowing QE, that doesn't stop it from growing. The FED has expanded their balance sheet by a third in the last 12 months. The ECB has contracted by a quarter.

The FED continuing QE without the support of the ECB is dangerous territory.

If the FED goes from adding 85 million a month to 75 million, it still means by Xmas next year they will be within striking distance of a balance of 5 trillion. The possible limit for the FED with QE is 7.5 trillion, this upper limit expands over time.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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MMM
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The bottom line is this, in 2008 they owed about 8 trillion , its now double that and the country is still screwed. With no end in sight.major companies and jobs are still moving offshore, JUST like here.
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Count du Monet
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MMM
19 Dec 2013, 09:48 AM
The bottom line is this, in 2008 they owed about 8 trillion , its now double that and the country is still screwed. With no end in sight.major companies and jobs are still moving offshore, JUST like here.
Of course jobs will move offshore while the borrow money and the meat and bones of that capital is coming offshore.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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MMM
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Count du Monet
19 Dec 2013, 10:09 AM
Of course jobs will move offshore while the borrow money and the meat and bones of that capital is coming offshore.
What are saying count, that its GAME OVER........ ;)
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miw
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MMM
19 Dec 2013, 08:21 AM
I am surprised they have tapered now. If you had of asked me a couple of days ago if I thought there would be a tapper in December , I would; of said no, and would of rated it about 10% chance. The main reasons being that its holiday time , Xmas in a week and I thought if they did taper it might start them off on the wrong foot to begin 2014.
It's the US. It's not holiday time in the US. They are pretty-much business as normal in December. It's July-August when you can get nothing done in the northern hemisphere.

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Some have said they are surprised at the market reaction and even more so , the price of gold. They both did not do much at all .


Are you kidding? everything except gold went ballistic at the news. Although gold seems to be taking a bit of a beating now that Asia has opened.

The most interesting thing is to see a portion of the commentariat who were saying "The Fed will never taper" only yesterday to "this was a dummy taper and not really a taper at all" or "the Fed can taper as much as it likes and it will make no difference" today. Despite the fact that a $10B taper is right down the middle of everybody's expectation of what the first move would be. The only real discussion was whether it would be December 17-18 under Bernanke or January 28-29 under Yellen.

I guess that in 9-12 months' time when asset purchases have stopped, the next step in the denial chain will be "There really effectively was no QE. It had no effect. It was just shifting funny money around. Buy gold now. At $950 it is seriously undervalued".
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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Count du Monet
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MMM
19 Dec 2013, 10:25 AM
What are saying count, that its GAME OVER........ ;)
No, but at present the US only has a workforce suited to moving refrigerators and installing custom kitchens. That at present is its commercial sector.

Changing direction would take time at the very least. What can the US export to correct its balance of trade beside more IOU's?

Of course the lucky ones get to be rock stars.

Edited by Count du Monet, 19 Dec 2013, 04:30 PM.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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Andrew Judd
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So the Fed is still adding to QE at a rate of 75B per month??

:D

Back in 1972 or so the entire amount spent on the molten salt reactor program was about 100M. What is that in todays terms? I doubt it is 5B. 75B still represents an unimaginable amount of money that is flowing into riskier assets where it is certain this encouragement to be risky will continue indefinately unless either inflation increases (which seems very very highly unlikely) or the negative consequences of encouraging people into risky speculative behaviours becomes impossible to ignore any longer.

America today is in a very very similar position to where it was in the years that led up to the 2007 crash and meanwhile countries that benefited from US spending are in a manner of speaking in ruins, unless they were themselves in a position to spend more or less like no tomorrow to avoid major internal problems - for example AAA Finland had fairly low debt but immediately spent to have the kind of debt that conservative small countries (which have blown up before in recent memory) worry about

So party on! Only a crack up boom leading to a crash is going to get them to slow down the stimulus program
Edited by Andrew Judd, 19 Dec 2013, 07:16 PM.
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Count du Monet
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Andrew Judd
19 Dec 2013, 07:02 PM




America today is in a very very similar position to where it was in the years that led up to the 2007 crash and meanwhile countries that benefited from US spending are in a manner of speaking in ruins, unless they were themselves in a position to spend more or less like no tomorrow to avoid major internal problems - for example AAA Finland had fairly low debt but immediately spent to have the kind of debt that conservative small countries (which have blown up before in recent memory) worry about
The Mysteries of the USD?

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So the Fed is still adding to QE at a rate of 75B per month??


I wonder what the consequences will be, although the FED could max their balance sheet to 7.5 trillion if they wanted to? The immediate aim is to keep rates low.
Edited by Count du Monet, 19 Dec 2013, 08:15 PM.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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Andrew Judd
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Count du Monet
19 Dec 2013, 08:15 PM
The Mysteries of the USD?
As far as you are personally concerned it is the mystery of credit. Nobody else however seems to find it so fiendishly difficult to understand!

Edited by Andrew Judd, 19 Dec 2013, 08:37 PM.
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