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On the Tapir
So I was a party over the weekend. Some of us were on the porch sucking down Mojitos and talking money. Everyone had something to say about the Taper. It's good. It's bad, It's too soon. It's too late - the usual blather. I tend to dwell on the dark side of things, so chimed in with, "I'm afraid of the Taper."
Later, I was eating some food and a little girl comes up to me. She's maybe 8, carrying a tablet. She says, "Don't be afraid of the tapir. It's not scary". She shows me this picture:
The girl's confusion on what Taper really means, and why I should be afraid of it, is no different from everyone else. No one really understands the implications. The markets, the entire FRB (especially Bernanke), the Press and most citizens have no clue what The Taper means. My thoughts:
- The word Taper has a decidedly negative connotations attached to it. It's Bad because it implies that all asset values have to come down. This may, or may not prove to be true over time, but it's most certainly the case today. Taper Talk is bad for money-men.
Bernanke has created the Taper. Yesterday he made it clear that the word Taper will be a matter of daily discussion for at least another 12 months (I think it will be longer than that). In my book, this does not bode well for market psychology for an extended period.
- The shock value of QE1 was helpful in stabilizing a collapsing system in 2009. But QE3 was/is an overdose of an emergency tonic. The Fed made a mistake when it committed to an $85Bn monthly buy-in. Bernanke created a monetary VLCC (very large crude carrier). The SS Bernanke is laden with crude and going full speed ahead at this point. It will take a minimum of twelve months just to slow it down - it will take three years to turn the ship in the other direction. What better evidence could you ask for to prove the point that the USA is addicted to printing?
- Bernanke's QE exit strategy is flawed. He thinks that if he drags out the process of winding down QE it will minimize the consequences. I see it differently - the longer this takes, the more pain it will cause. If the Fed had announced that it was ending the $45Bn month T-Bond buys over a short period of time (three months) AND at the same time confirmed that the MBS purchases of $40BN a month would continue for "an extended period of time", then the issue of Taper would be in the rear-view mirror rather than in the miles ahead.
I think the markets (and therefore the economy) would have been better off if Bernanke had acted decisively and trimmed down QE3 with a bang. Yes, there would have been a market correction in this scenario, but money men like certainty. Interest rates would have adjusted higher, but with ZIRP and low inflation, the bond market would not have run out of control. If you have to get something cut out, it's better to get it over and done with. Ben is standing over the patient with a scalpel saying. "this won't hurt a bit". That might be the case, but we have to wait a half-year before the scalpel actual falls.
- I see the Taper Affair as a failure of Bernanke's communication policy. He's been vaguely hinting and leaking information about ending QE for months. He should have kept his cards hidden, and then acted. Contrast Bernanke with Volker. When Volker had to make hard choices - he did it. He surprised the markets again and again. Bernanke is trying to sugar coat a bitter pill. Dragging this out is a bad hand to play.
- Bernanke has ZERO credibility when it comes to Taper Talk. That's a fact given that Old Ben will not be around to actually watch over the unwind of QE - he will be back in Princeton and making big bucks on the lecture tour when this dime drops. The "Gradual Taper" will not start until the fall; the talked about end date of "a year from now, maybe" is well into the new Fed Head's job. The bulk of the slowdown in monthly QE will occur after Ben gets his gold watch.
This obvious conflict will fray at the markets. "Who's it going to be?" "What will he or she do?" are questions that will hang in the air. Bernanke has to be aware of this. One option that he must be considering is an early appointment of his replacement.
This must happen in the next five months. It would be better to get the transition resolved sooner rather than have it add to the uncertainties. I don't think the next Fed Chairman will have an easy ride in Senate conformation hearings; if left until the end of the year, there is the potential that we go for a period of time with no one running the show. That would be a big mistake.
- If global markets continue to roil over the Taper, Ben will have to consider a change of strategy. Accelerating the transition to a new face at the Fed is not out of the question. If Tim Geithner gets the nod for the job, I will personally march on Washington in protest.
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its nose looks like my dick (except for the 2 holes)
sorry!
" the bulk of the slowdown in monthly QE will occur after Ben gets his gold watch." He will not accept this watch, it is made of a barbarous relic.
"I see the Taper Affair as a failure of Bernanke's communication policy."
The real failure is Bernanke's monetary policy, which lead to the tapir affair.
Bruce,
Great essay as usual, but my take is that Bernanke doesn't believe he can act decisively to end this policy, and so is depending on jaw-boning instead. The market will call this bluff as I see it, and call it quickly.
There will be no taper. They can't do it or the international bank balloon collapses, and with it all the 2B2Fails in NYC. Taper is a myth. www.electanewcongress.com
Nice the see you Bruce.
The real mistake is the FED itself.
This whole thing stinks of charades. I have read or heard no one ask who will purchase the nearly trillion in debt the USA continues to produce. The Japanese? Russians? Chinese? Sheesh!
In less than six months this beared bozo will be out of office and his words now will mean nothing. Who listens to a president during their last year in office. Has anyone heard of the term lame duck? Or are we all just too lame, like this article.
Hey Bruce,
In Italy there is an award given out called the Tapiro D'Oro.
From a lousy translation by Google Translate:
Tapiro d'Oro
The award is given for having experienced some gesture or absurd / rude action, or having experienced some flaw in their field. By having received the award, one should feel guilty or depressed about what has been done or has happened to him, and therefore should have a sad face or a long snout, which is then compared to the features of the elongated snout and the proboscis of the tapir .
http://it.wikipedia.org/wiki/File:Tapiro_d%27Oro.JPG
Obama will most likely nominate Rahm Emanuel or David Axelrod.
Gag me with a maggot
Just curious Bruce, why do you think Geithner will be the guy. You are not alone. I read elsewhere recently Timmy G is the frontrunner. Rumors? I would think so, but they seemed quite sure.
Thanks for your work. Always enjoy your insights.
Ex NY Fed.
Ex T-Sec.
This makes him a candidate.
Believe it or not, there's a lot of people who like Timmy.
Timmy is a Dove. He's a "printer". There's a lot of fools in DC who LOVE printers.....
Understand. I'm with you though. Obie picks that fucking criminal and I'll go to DC with you.
So, a female friend of mine passed by the computer, saw the picture and laughed.
"Oh! I dated that guy."
"Really. What happened?"
Well, I got'im in bed and thought I would marry him in about 5 minutes...But I had to let him go."
"Why?", I asked.
"I mean, how would you feel?
He never calls...He never writes..."
Are we talking about Bruce or the Tapir here?
(the Tapir looks like half the residents of NJ)
so the moral is : she is one smart female; others would just be happy that he bites and has a large hose pipe and a huge tongue that would suck in a mountain of rose budded flesh?
I wonder what that 8 year old will grow up to become. Tapered or Tapired?
Gene Simmons.
Chairman Ben has already checked out. HE has mentally resigned so the efforts we see are of a tired, bored, and ineffective old man. Timmah or Yellin or whatever will prime the pump when CB leaves in a few months, then the s/hits the fan, big time. Now get yourselves in order like Kyle said in the other post. You have been warned.
I vision a helicopter drop to the proles, before long.
If Bernanke tapers, deflation and economic deterioration will accelerate. To fight this, Bernanke will have to increase monetary stimulus that will continue to stifle growth and price discovery.
Summers, Geithner, Krugman... I'd love them all to be at the helm when this fucker goes down, just to see the smug "I'm all right, Jack!" grins wiped off their loathesome faces.
let's drop all pretense and give the job to Kneel Kaskari...
http://en.wikipedia.org/wiki/Neel_Kashkari
Kaiser Sosa
Then let it be Geithner, for it is he who has the cutest smile!
It will be Yellen and she will mindlessly follow Bernanke's policies. Things will probably unravel under her, but people will know to point the finger at Bernanke.
Actually, the finger should more accurately be pointed at Greenspan. Bernanke is just a servile, backward-looking ideologue, middleman and bagholder, in over his head. See how he shakes and trembles. The best thing for his own health would be to scout a replacement ASAP.
None of the people mentioned above have the mental capacity and fibre to do what needs to be done in the interest of the American people. We need somebody with a code, somebody really bright, somebody competent, and with no baggage - someone who will stand apart from Goldman Sachs and the bankster complex. Everybody in that circle is riding for the brand. We need a new ranger.
...But it ain't gonna happen. They're going to drag us down with the ship.
Oh I agree, but you are arguing should be done versus what will be done.
And if you go further back you could also blame it on Rubin, or Nixon, or...
Don't blame the sock puppet, focus on the hand that moves it!
Perceptive. We focus too much on figureheads and symptoms. On the other hand, unfortunately, we are not free to talk openly about forces behind the scenes. Much gets left to the newcomer's imagination, fed by fantastic myths from popular culture.
If Tim Geithner gets the nod for the job, I will personally march on Washington in protest.
Fuck me. Just the thought of it. Fuck me.
Then again there would be something lyrically just about Geithner doing the The Great Unwind. At the point when panic breaks out, and there will be a point or points, Geithner will have to go begging for bailing again. He will get crucified because he was in Act I, II and III of the first American Tragedy and will have to admit there was no real Act III.
Also.. I think I read that although the Fed balance sheet will see certain outgoing traffic of USTs, the Walking Dead agency MBSs (and the other fancy collateral horseshit) will remain in the drawer. As the 6-Sigma unanticipated is always possible when your plan is based on VooDoo and goat entrails, wouldn't it be fun to watch Timmeh manage the Fed Balance Sheet into some defacto crapbond principle insolvency? We have no way out no matter what as this Tragedy plays out, but wouldn't it be fun to watch the Hampton/Newport Beachfront crowd get wiped by the Tinkerbell Markets they so cleverly created for their benefit.
On second thought, Geithner would be an expedient pick for the Fed. However this works out, it is going to be an ugly bitch along the way.
I would like Geithner front-row, with his balls in a vise to not miss a minute of it.
they're only floating Tim and Larry's name to make Yellowing look good
The Obama Rose interview where he made it look like he was firing Benny -- question is what is Obi's angle here? and are Benny's actions now a reflectgion of what Obi wants or the opposite?
"The Obama Rose interview where he made it look like he was firing Benny -- question is what is Obi's angle here? "
O'Bama is dumping Ben probably because of the Taper. I think he wasn't Ben to double down and follow Japan's Abe. Or, O'Bama wants the Taper so the economy crators before the Mid-term elections so he can use the economy as leverage to help boot out the GOP in Congress. What ever the reason is, I am sure its not for the good on the country.
I might have given the little girl a Mojito and told her to get lost.
/JK
The Bernank is trying to get the benefits of tapering QE without actually tapering. The reality is that we will neet to increase QE. The dollar is headed way higher as the cleanest dirty shirt in the laundry. The Bernank is committed to WEAKENING the dollar and forcing every other country to absorb our inflation by increasing their money supply to buy our treasuries. The market was due for a fall and the logical "explanation" is tapering. Never going to happen.
Dudes the envy of dogs.
Tree sloth is more like it. So slow it never really seems to cross the road. And a bonus, it does not have an anus, it shits through it's skin.
If the FedRes stops printing then the FedGov has to cut spending by at least 40%, most likely more, as the interest on the debt will become more and more of a problem as interest rates rise. Or find the funding elsewhere. Won't happen. Bottom line?
The only way out is to ride this puppy into the ground. Once they collapse the Federal Reserve Note, they will parade out the new and improved backed by something NewBux and start again. Everybody but them wiped out, and another 100 years before the NewBux die.
My favorite animal at the Woodland Park Zoo. When my son was a little boy, it was the first animal he had to see - every time we went.
the yellow bellied 50/50? i'm not a racist because i hate our president, i just don't trust presidents with an iota of white genes. truthfully, i prefer no presidents, nor any government, at all.
A necessary ill, but that doesn't mean thEY have to be sicko bastards like they seem to be.
Not scary, not scary... I was once riding a mountain bike in the Malaysian jungle, when we came across tiger paw marks in the mud. The animal seemed to have been running and chasing another one. Everyone freaked out and went back home asap. I took some photos first. Turned out they were tapir foot prints. Not quite tiger paws when you put them side by side, but close and big enough to make a dozen grown men run for their lives!
If stopping QE was ever an actual possibility it would have happened by now.
not gettin it are y'all, "fundamental transformation" requires a caollapse of the fiancial syztem. a collapse, obviously, will not happen under a regime of printing money, it woulgd have by now, another trillion is a rounding error. take the money back, take the commoditiy complex DOWN, and we have lost the only promise we have, ENERGY AND GRAINS. not saying a RESET would be bad, but transformation that obooger wants will be painful. texas is a lost cause without the ALAMO, amen.
yep
So, raise the debt ceiling (to INF or NAN), make every auction successful (who check if there's an actual buyer?) and monetize it right after (nothing to hide these days...).
Inflation it will be, money be damned.
Summers will be the next Fed Head, and he will outright monetize.
Obama will nominate a black, hispanic, woman, or gay chairman. He can't wait to pat himself on the back for affirmative action at the fed.
So, Summers it is.
Come on man. I don't want to replace another keyboard this early in the morning.
Only finished half the cup.
Omnis canis habet dies
So no change you're saying.
http://www.youtube.com/watch?v=ZdXfkkyI1nQ
Don't Fear The Reaper
(needs more cow bell)
just like the sequestir. what sequestir? just crooked fukkers creating volatility for thier crooked partners, and, themselves.