Deutsche Bank Floats The "Why Bother With Tapering At All" Bubble

Tyler Durden's picture

With the government reopened, and the debt-ceiling non-negotiation off the table, if only for another 3 months, Wall Street's experts have fallen back to what they do worst: attemping to predict when the Fed will Taper. And just as virtually all economists were convinced the September tapering is a done deal, so nobody sees a Taper in the next three months, and certainly not before March, or, in the case of Larry Fink, June 2014. One thing, however, that nobody in polite, statist company has brought up yet is not only the possibility, but increasingly the probability, that there may not be a taper. At all. Well, Deutsche Bank - the first of any major Wall Street institution - just floated "that" particular bubble. To wit: since "the Fed possibly only has a narrow window to taper before it’s faced with economic headwinds again and if this is the case then why bother taper at all?"

From Deutsche's Jim Reid:

After yesterday's payroll number the opening paragraph writes itself this morning with the softness clearly further reducing the probability of tapering over the next 3-6 months. I suppose the only concern is that this is becoming consensus and perhaps too obvious. However if the employment data isn't improving its hard to imagine a Yellen-led Fed risking upsetting the recovery whatever their fears about the risks of ongoing QE. What else is there? Potentially cleansing defaults have been a policy no-no for years now and expansive fiscal policy which might be useful for jobs and growth is not going to happen with politics so divided. So QE remains the highly imperfect main policy tool.


If you're looking for a less consensus view, I was chatting with DB's US rate strategist Dominic Konstam yesterday and he is continuing to run with his recent theme that the labour market is exhibiting "late cycle" tendencies which lead him to believe that this cycle only has a 50/50 chance of extending much beyond 2015. Therefore he is considering the prospect that the Fed possibly only has a narrow window to taper before it’s faced with economic headwinds again and if this is the case then why bother taper at all? If employment is indeed late cycle maybe the conditions don't quite get strong enough in 2014 to persuade the Fed to be too aggressive in pulling back liquidity. He also thinks 2.25% is a good near-term target for 10 year yields and like us feels that risk assets will be supported over the next few months by the Fed's taper delay but worries whether they can always resist gravity, especially when the cycle turns. An interesting chat and his thoughts are always worth listening to.

Expect many more to join this particular bandwagon, subsequent to which, we also expect that other uber-heretic thought, that instead of tapering, the Fed will proceed to monetize even more than $85 billion per month, crumbling collateral environment and shadow banking be damned. Heretic, because it will mean that the Fed not only can't limit its monthly flow any more, but will have to monetize ever more and more each month, until it ultimately, and logically, runs out of stuff to buy. Which is why, in retrospect, the appointment of Yellen may have been the best thing to happen to the Fed: if nothing else, she will at least bring on the grand reset of a broken monetary and economic system that much faster than someone who may have been at least superficially cautious.



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firstdivision's picture

If we get rid of the fabled Taper, how will banks find the excuse for forcing longs out of their positions so that they can acquire those equities on a discount to allow them to jam them and force shorts to cover?

PartysOver's picture

Just when you think it can not get any more insane......  

It's going to be the Mother of All Epic Fails.

King_of_simpletons's picture

Why bother with stock markets ? Just give everybody in the country a wad of currency notes every month. End of story.

fonzannoon's picture

Why bother giving currency notes to everyone when this is working just fine for them?

Paper CRUSHer's picture

Lol.......indeed,bank note printer De La Rue has warned of rising costs(inflation?) and competition(counterfeiting?) as profits from printing plunged.

HoofHearted's picture

This is financial terrorism, and it must be stopped at all costs. How dare some foreign bank give out the Fed's actual playbook? Oh shit, that means ZH and all of us have been financial terrorists for a long time, as we saw this from way back. It's a little surprising to see this discussed so soon, but we all knew it was coming. Trial balloon anyone???

Poor Grogman's picture

Tax the fed

It's for the children.

NoDebt's picture

Based on what set of books?  

Poor Grogman's picture

Make the private shareholders pay.

Retrospective back taxes for the last 100 years!

Go get em IRS...

forwardho's picture

Tax the Children.

It's for the fed

GetZeeGold's picture



Taking a cue from Weimer's time to legalize everything.


Just stop talking about will come when the time is right. Now where did I put that wheelbarrow?

PartysOver's picture

War, what's it good for?

Oh yea, Central Bank Balance Sheet clean ups.

petolo's picture

Give them bread and wheelbarrows. Enough circusses already.

AbbeBrel's picture

Better buy a wheelbarrow with your fiat NOW NOW NOW -


while you can still haul enough cash without one to pay for it!!

slotmouth's picture

No tapering isn't good enough, we want moar!

JustObserving's picture

Can't wait until they ask for negative tapering.

GetZeeGold's picture



OK....I see what you did there.

AbbeBrel's picture

Sure why not go to INFINITY - and beyond!!!  Why NOT one trillion a month!!   What the heck!!


Reminds me of that Eagles song - Take It To The Limit

Trivia : The lead singer was Meisner.  He was born in Scottsbluff, Nebraska.  He is of Russian and German descent.   So a big defaulter (Russia) and a big famous Hyperinflationist country (Weimar Germany) meet to produce the Theme Song for the Fed!!   Straight from the Heartland of the ol' USA!

shovelhead's picture

Poor Randy.

Replaced by a dog on Poco's first album cover painting. That had to hurt.

Lucky for him his next band didn't call themselves The Beagles.


duo's picture

Hmm, 20 million young healty people spending $250/month for health care.  What wouldn't they buy with that money?  Cars, iPhones, vacations?  We won't have to wait until 2015 for the cycle to end.

To replace Obamacare premiums alone, we'd need $5B a month MOAR QE!

Incubus's picture

I'm floating my idea for healthcare: 


use that 250 dollars a month for ammo and nonperishables and other long term survival gear -- and then let the chips fall where they may. 


29.5 hours's picture


"What wouldn't they buy with that money?"

How about spend even more after their health plans are unilaterally cancelled?

300,000 in Florida...

Thousands Of Consumers Get Insurance Cancellation Notices
DeadFred's picture

Who gave DB permission to join the fringe blogs?

RSloane's picture

Doesn't matter, our dear leader said to avoid reading blogs and just listen to WH press statements, unless of course the blogs reflect Obama's POV.

ultimate warrior's picture
"September 11 - The New Pearl Harbor" - Full version (1/3)


Mind blowing documentary that everyone should watch. You will not be disappointed. 

Hobbleknee's picture

A great video that is easy to swallow for those who haven't taken the red pill yet.

bigkahuna's picture

Why bother with an economy at all? Lets just skip the whole thing and go straight to mad max right? Thanks DB!

AbbeBrel's picture

Good idea to save canned goods and watch "A Boy And His Dog" another time.   

roadhazard's picture

Don Johnson's first film.

29.5 hours's picture


"He also thinks 2.25% is a good near-term target for 10 year yields"

Target? Can't they just decree the yield?

I refuse to read any more of these posts from The Onion...



blindman's picture

The Power Principle: (Full Length Documentary)

Dewey Cheatum Howe's picture

Why doesn't everyone just permanently shove their heads up their asses.........

Dewey Cheatum Howe's picture

I really wish I could some days, my brain it seems is just not wired to do so.

foytik's picture

The impetus to buy $85 billion or so of treasury bonds is to keep interest rates low. Nobody else wants them at that price. The Fed could perhaps create the appearance of tapering if it used shell offshore companies to buy the debt, and/or required primary dealers to buy it. But that is just window dressing, as long as the federal govt. continues to have debts of over 500 billion a year I think the fed will have to keep buying at large rates. Supposedly (according to CBO) deficits will be down in 2014 and perhaps 2015 before rising very fast, so perhaps we will see a small tapering for a year or so, then forget it. I don't believe the CBO estimates, what with the Obamacare disaster in 2014, does not seem likely that federal revenue will be up.

I don't think the fed will ever face the problem of there not being anything left to buy, they dont need to buy for its own sake, just to keep the treasury bonds low.


Its_the_economy_stupid's picture

Let's not forget, this economic disaster is rooted in federal tax and trade policies, not social programs. The social programs are just a symptom of wealth transfer.

Dewey Cheatum Howe's picture

It is more simple than that. As the saying goes. "The American Republic will endure until politicians realize they can bribe the people with their own money." And the inverse the American Republic will endure until people realize they can bribe the politicians with their own money. Whether it is the chicken or egg that starts it once it starts it is self referential and turns into a vicious feedback loop until destruction or equilibrium is achieved. Corporations aren't people but they are aggregates of people and those people within those arggregates tend to be better force multipliers in this type of system.

Dewey Cheatum Howe's picture

Frankly I am surprised they haven't just done that aka use shell companies but that would have required some creative thinking and actually giving a shit about appearances on their part.

Mercury's picture

Time for another chapter of the stock vs. flow discussion…

fonzannoon's picture

Yes it is. That chapter may need updating. Here is a thought from someone who understands this stuff way more than I do.

"they are still sticking to their whole "its the flow, not stock" theme. I cant believe it, they honestly are still trying to advance the argument that the Fed's pomo is DIRECTLY driving up stocks, in other words the market is literally raised by periodic liquidity injections. That was the meme during QE2 before people began to realize the big picture. Its amazing that the Tylers still cant/wont see it- "but will have to monetize ever more and more each month, until it ultimately, and logically, runs out of stuff to buy." Concluding that when the Fed runs out of stuff to buy THEN comes the "great reset", completely missing the point that when the Fed does run out of stuff to buy it is because it owns the entire bond market lol, and the gov never needs to pay interest again, AND leaving granny having to put her savings in SPY. What the fuck kind of "reset" is that lol? 

They made that their whole centerpiece of argument and it has been completely disproven, its exactly the other way around- its the stock that counts NOT the flow."

That person would defend those comments, and probably take this to a higher intellectual level where we could at least flush out what is really going on, but they got the boot.


Mercury's picture

Because when the government borrows money and then turns around and prints more money to buy the debenture back it’s essentially the same thing as simply printing money and spending it.

Read up on Mugabe, Robert, Zimbabwe and you’ll understand why the flip side of “never having to pay interest again” in this regard is destroying the economy which is still not –officially anyway- a policy goal of anyone with significant political power in the US.

Take a gander at what happened to the SPX when the Fed mentioned that it probably might start thinking about reducing the magnitude of QE sometime in the future and then tell me how POMO doesn't directly inflate equity prices.

AbbeBrel's picture

Koo says they never should have started it, and has chartporn to back up his argument:



RICHARD KOO: I Can't Find Anyone To Refute My Argument That America Is In A 'QE Trap'

Read more:

kareninca's picture

the dimeshowman guy got the boot???

for making an argument about Fed bond buying????


Chump's picture

Why bother with QE at all?  Just give everyone a check for a hundred grand and be done with it.

Income inequality - boom, solved.

Plebes crushed by debt - boom, solved.

Lethargic consumption - boom, solved.

Hell, all that money will end up right back in the hands of the banksters anyway after a year or so.  It's a win-win!

While we're at it, raise minimum wage to, say, $1,500/hr.  Quit pussyfooting around and go full retard already.


No sarc tag here, because if you need one you need to head on back to the Yahoo forums.  Or just kill yourself.

GrinandBearit's picture

Only $100,000?  Let's make it cool $1,000,000.

QE prosperity for everyone!

Chump's picture

GrinandBearit for Fed Chairman!

SDShack's picture

Excellent analysis, except for one problem. You need to think about wealth redistribution from a banker's prespective, not a consumer's prespective. You see a consumer, flush with "free money" will most likely first pay off debts, buy some toys, then invest a good portion of what is left in real property. In fact, a good portion of the money to pay off debts would probably be a lot of people paying off debts for real property. That is how a good consumer would think, BUT it's not how the banks WANT the consumer to think. The banks exist for only one thing... MORE DEBT because in the long run... more debt leads to UNSUSTAINABLE DEBT by the consumer, which leads to DEFAULT, and asset and property confiscation by the lender. Bankers only exist to increase their portfolio of real assets.... real assets that are held by the masses... because that is how bankers control the masses.  Debt slaves... Serfs. So free money will never by given to the masses because it is counter productive to what BANKERS want. Nice theory though. I would support it. But a more realistic theory is the Guillontine Theory whereby the masses revolt and take the wealth from the bankers. Unfortunately, that has about as much chance of succeeding as your theory given TPTB have purchased all powers of govt to put down any kind of rebellion... NSA Spying, IRS Extortion, DHS ammo stockpiling. etc.

Chump's picture

Buuzzzzkillll brah!  Too bad you're spot on...