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Pulling The Plug On QE – Will The Fed Ever Taper?
Saxo Capital Markets’ latest infographic explores the long-term value of quantitative easing (QE) and, surveying the effect on the US economy, asks whether the US Federal Reserve will ever taper QE.
The Fed first launched quantitative easing in November 2008 after efforts to boost the economy by lowering interest rates failed. The first programme of QE saw $600 billion injected into the economy by the Fed via mortgage-backed securities and government-sponsored enterprises. This then increased to $1.25 trillion as part of an expansion due to low initial impact. Again, the Fed tried QE in November 2010 with another $600 million invested in longer term Treasury securities. When this still failed to make a great enough impact, Ben Bernanke, chairman of the Federal Reserve, introduced a continuous QE programme, dubbed ‘QE Infinity’, which commits the Fed to buying up bonds at an alarming rate of $85 billion a month.
Quantitative easing, experts once assured us, would inspire the US economic recovery, leading the flagging economy to full health. But will this fiscal stimulus experiment instead drive the US economy to inflation and financial disaster? The Federal Reserve’s decision not to begin a tapering of its asset purchase programme signals a deeper dependency on intangible money printing. Last September’s third round of QE bond purchases were enacted in order to drive down interest rates, allowing businesses to borrow more easily, consequently boosting stock valuations. The QE addiction risks long-term hyperinflation and massive currency devaluation, fuelling market distortions and long-term reliance. Yet tapering may spark a climb in interest rates, prompting further – widespread – financial problems.
Saxo Capital Markets’ infographic draws attention to a mending US economy, with unemployment rates falling to 7.3% - albeit propped up by part-time workers – and Q2 GDP rising by 2.5% in 2013. Can the Fed kick the habit? These indications of growth prompted Bernanke to hint at QE tapering in June of this year, even stating that asset purchases (how the Fed has achieved QE) could come to an end if the US unemployment rate “is in the vicinity of 7%”. You can find more detailed figures, and see graphs of the changes and predictions, by checking the infographic.
Although QE tapering has been suggested, Bernanke has yet to announce a specific date when the artificially-sustained US economy will begin to be weaned off QE. Now, in October, the Fed has said that it will reduce asset purchases in early 2014, but they have laid out no specific timeline for this tapering. The Fed is also reluctant to make changes to Federal rates, announcing that they will remain at their current low levels. It is not until 2015 that they plan to start raising them again. You can see the expected pace of policy firming based on FOMC forecasts by viewing the graph in the infographic – the ‘long term’ forecast is for interest rates to return to 4%, but after how long?
There’s no doubt that QE Infinity has had an effect on a number of financial areas, including market rates. Ten Year US Treasury Yields have almost doubled in the last four months – you can see the visualised growth of US bond yields in the infographic – and this increase in growth could deter the Fed from tapering QE. Saxo Bank’s Head of FX Strategy, John Hardy, believes this may be the case and thinks that QE tapering could be “derailed by a weak US economy that can’t withstand the rise in interest rates we have already seen”.
Equity markets have also rallied in response to QE because the asset purchase programmes have invested money into private companies and their stocks have increased as a result. Savers are also choosing to invest in stocks whilst interest rates are low. When the FOMC decided not to start tapering QE, it meant equity markets continued to increase. You can track the value of the Dow Jones, DAX and FTSE over the last year in the infographic. If QE is encouraging the equity markets increase, will the Fed ever risk tapering?
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Will the Fed ever tighten?
Do poops ever not taper?
Unless too much opiates or dead.... Holy shit!* Maybe there's a message in that!
*No I did not make that pun by myself
Taper now and the system faces a crisis of enormous proportions. Taper later the crisis will be larger. Do not taper and the future crisis will wipe everything out guaranteed. Pass the buck onto future generations, the Progressive way.
In summary: The system feces a crisis of enormous proportions.
In summary of summary: We are fucked either way.
Love all these dont taper me bro stories from the financial sector ....the bs is so obvious
OT....Twitter gets sued for Securities fraud. ..good job Icann Gross and the rest of you whores/ thieves
Does a Polar Bear shit in the woods.
The simple fact that we are only talking about the possibility of tapering/tightening, shows that all sanity has been lost.
This is simply a discussion on how much money to keep printing, the discussion for now on will never be about whether or not to print at all.
History will judge this time period harshly.
You guys are in for a big surprise today. Liesman just called us and Cohen. The Fed is making a tapering announcement today.
Yes, they will make an "announcement" (while increasing the morphine drip to 180 billion per month).
'Will the Fed ever taper?'
AH-HAHAHAHAHAHAHA [breathes] HAHAHAHAHAHAHAHAHAHA [breathes] HAHAHAHAHAHAHAHAHAHA. . .
No the Fed will never taper. What did I win?
me yellin 4 170billn bennybucks/month
Paper bankruptcy.
You won a date with Janet Yellen. Can't wait to see your date pics.
CDS counterparty and legal risks on tic tac...
CDS counterparty???? Good one!
dup
I believe JPM's PERMABULL Lee said this yesterday....." equities ready to explode to the upside"!!
Lee is a fucking TOOL of the highest order and paid to talk JPM book....So Fuck Him!
...a weak US economy that can’t withstand the rise in interest rates we have already seen”.
^^^THIS^^^ in a nutshell
++++ 1. That's all she wrote.
The FED will quit blowing taxpayer money on banks and the equity casino when NASA proves the moon is made of cheese.
That's the beauty of this Ponzi that Madoff eloquently spoke of, there is no tax payer, there is no last man standing with a job to tax.
The FED pulls FIAT out of its ARSE, and buys US DEBT and the US government creates money from the bond's sold, but this is a new world order.
A perpetual motion machine of free 'money'.
Fuck Trillions, soon it will be Quadrillions, ...who gives a fuck, everybody will be a billionaire just like Zambabwe.
Taper? Are you mad? They're going to have to start doubling down every 10-12 months now. $85b/mo... $170b/mo... $340b/mo.... it's coming, folks.
Doubling down. It has the sort of logical symmetry that appeals to a central bankster....
Plus with one decision, you can make years worth of decisions.... Just keep doubling down....
It is their plan.
'doubling down?'
Heck no, it won't be no doubling down. It will be freaking exponential if they want to keep having an actual economic affect in the markets. The BoJ already tried 'doubling down', and everyone saw how well that worked (i.e - it didn't). Double the stimulus and the time it lasts gets cut in half with each round of stimulus. Fukushima taught the BoJ well. The Fed is sure to have picked up some tricks or two from them.
There is no other buyer of DEBT.
Thus the FED is now the US Taxpayer.
The FED is now the BOSS in the MAFIA sense of the USA.
'Taper' was orginally meant to wean a meth whore off meth, but now that the whore is the queen mother of the USA, and her life support is essential 60% of the USA public, there is no way in hell, ... the Whore will not get less, she will get more, she will get all she wants, for the METH WHORE is america herself. Given not a single fucker on the planet is willing to provide meth to the whore other than the FED, and given the fact that the majority of the USA public are on the dole and suck tit on the meth whore, its in nobody's interest to rock the boat.
Unless the USA of course can engineer a 1979 purchase of US debt by offering 20% rates to the world, but its understood now the debt is too BIG,
Some kind of 'reset' ( aka debt Jubilee ) , and then we can talk about ending the 'FIX' to the whore,
Will pigs ever sprout wings and fly?
Yes Kralizec, pigs can fly. I jumped of the empire state building and have been flying for several seconds now. :)
I just need to learn how to change my course because so far only flying in one direction....
Called dreamliners.
lol. Your joking right?
Ben talks taper (doesn't do it) rates in US jump over 100basis points in 6 weeks.
Here is one for you. What if the FED talks easing, but then actually tapers?
Who would know the fucking difference?
I vote for the negative taper:
170T$/month should do for the next year or so.
When in doubt, double down!!!!
Wait for a surprise today.
The thought that somehow the US consumer is going to come to the rescue does not make any sense.
The US consumer, with the exception of a few 1%'ers, has now recognized his role in the world and is kinda pissed about it. After years of being WS's Muppet, it now sees the Muppet when looking in the mirror.
WS, you just killed the golden goose
Did Madoff ever taper?
What a freaking joke? Are these analysts really that stupid or are that corrupt? I think we know the answer. The Fed will never taper or tighten. It is QE-to-the-collapse, plain and simple. Fuck Bernanke. Fuck Yellen. Fuck all the banksters and their cohorts.
When you get all your funds from the government to justify your existence you must say what they tell you to say!
Why do you think there are only "scare the crap out of the stupid people about second hand smoke ads on TV all the time" because all the researchers are funded by the government! So to avoid being unfunded and out of a job parrot whatever they tell you to parrot! Even if it is a big lie! That way you get your funding and get a paycheck!
Isn't that easy!
They're going to have to induce volatility so people still think the markets may actually be a risky place.
QE has become as much of an entitlement as Social Security and Medicare.
The whole taper balloon is floated in a feeble attempt to drive down the markets.....meanwhile (almost) everyone knows that there will be no taper and that the direction of QE is up....$130B a month, maybe? Starting with Yellen? Every time I hear taper talk it makes me laugh.....or think how much is that guy getting paid to spout this stuff? And how do they keep a straight face while doing it? Employment numbers (massaged as they are) are terrible......no recovery in sight.....just more tunnel and a very bright light at the end of it..........and these rails below are vibrating, wonder what that means?
“Nothing is so permanent as a temporary government program.” Milton Friedman
Taper Talk is just Potty Talk, fuck that shit... The US debt is terminal, and not worth fixing, right now uncle sam has a credit-card with no-max, so he'll continue to see how high he can go before the IMF call's him.
There will be a RESET, but before that there needs to be a war.
A reset is a failure to re-pay debt, a jubilee, the christians will eat that shit up,... sort of like a 'bank holiday'.
The war of course will most likely be a civil war native to the USA,...
The civil war will cause all external powers to dump their dollars, ... that will make the 'reset' easy.
Then its all over and a new day for new debt.
- Navajo warning
Read more: http://www.sulisminerva.org/2009/04/prairie-dogs-cry-for-rain.html#ixzz2jEXz9EPs
Under Creative Commons License: Attribution
It is kind of odd. Instead of "Oh my god are they going to keep throwing 85 billion month after month into the machinery" they have convinced us to passively ask 'Hmm I wonder if they will 'taper'?"
The unthinkable has become the norm.
No, they won't. They checked in the roach motel of monetary policy.
Apparently the non taper was priced in
Haven't all questions about this been put to rest from the last two meetings ?
After intermission, the Kabuki show contines...
Hey gang, ease up. Just because QE hasn't worked for the last 30 plus months does not mean it isn't going to work this month. A little faith out there.
(Do you suppose all those smart fuckers on the FED board ARE insane? Or are they just lying to us, and don't really give a shit about unemployment-it is all about propping up the market and further enriching the 1%?)
Nevah mind - rhetorical question.
There are many who believe there will be a tapering in 2014.
Such fools are losing their opportunity to buy gold in the meantime.
Hope is a dangerous thing