Taper Or No Taper - What The FOMC Has Really Said

Tyler Durden's picture

Economic history is pockmarked with policies instigated with the full intention of improving economic performance which have eventually turned out to do real damage. From the Napoleonic Wars to Weimar and up to the present day gold standards and Keynesianism, Deutsche's Jim Reid notes all too often economic institutions allow themselves to be stuck in intellectual cul-de-sacs at their peril. Such a risk appears alive and well today in the halls of the Federal Reserve. The outlook for tapering is mired in a continuing war between an institutional framework which sees QE as an emergency measure that has gone on far longer then was desired and an economy whose self-sustaining momentum is far from secure. The following statements from the FOMC members shows the tight-rope of uncertainty they are treading...

What The FOMC members have said about Taper...

The FOMC came very close to tapering at the September 2013 meeting. It seems likely that if (a) Congress hadn’t been on the brink of another bout of fiscal-political grandstanding and (b) markets (especially rates) hadn’t reacted quite so strongly to the comments Bernanke made in May/June earlier in the year then the Fed would have started tapering at the meeting, irrespective of the failure of the US economy to press on in the middle of 2013.

The FOMC will be slightly more hawkish in 2014 - and even more so if Stan Fischer is added...

So how biased will the Fed committee in 2014 continue to be against QE? One way to try and take a view on this is to see the relative balance of power of FOMC doves and hawks in 2014, with an eye to their 2013 predecessors

In conclusion, Deutsche believes there is a chance that the Fed’s institutional biases lead it to taper earlier then the economic data might suggest is optimal. Whilst Yellen may be able to push against some of these biases, 2014 will still see a tightrope balancing act at the Fed as economics and institution bias battle it out and increasing noise is made for forward guidance to replace QE as the main tool of monetary policy activism.

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stant's picture

the 10yr and the thirty sneaking up there, but i say no taper

LetThemEatRand's picture

There will be no taper, at least none that lasts more than a month or two to make a point that we need MOAR.

RafterManFMJ's picture

Yellen the Taper tease; just give it us already.

LetThemEatRand's picture

Yellen gave me a wooden nickel.

icanhasbailout's picture

"we will not taper until forced to by diminishing returns from merely talking about the possibility"

knukles's picture

So they taper and it really fucks things up, induces a global liquidation event.... psychologically.

Then whatchu gonna do?

Come on, spit it out, Ben, Janet, Diddley...
Come on, manage the Fed like a man.
I dare ya
Double dare ya'
Triple dare.
Kick him in the nuts when he's not looking.
Poke somebody's eye out and everybody'll have fun.


If you like fucked up markets you can keep your fucked up markets

Boris Alatovkrap's picture

Central Bankster world of wealth accumulation through fiat manipulation and re-hypothecation is soon to come direct contact with brick wall of market reality. Only question is remain which bankster is consume which bankster as shadow bank wealth is soon pursue hard asset class.

new game's picture

simply put-buy real shit soon.

Headbanger's picture

You "no taper, market goes up forever" Kool-Aid drinking cheerleaders are looking really scared here.

You all must be soon to be terminated Wall Street types who haven't been in the real world you're whole life.

Just don't tell any of the real people you'll all have to deal with soon that you were a Wall Streeter or bankster.

And ditch the tribal clothes you have like the one that says "Harvard Lacrosse"  or say terms like "win win"

And watch the movie "Idiocracy" at least five times to acclimate yourself to society today.

Good luck!  And welcome you new Wal Mart shoppers!

Popo's picture

Where's the uncertainty? They're fucked. Bernanke tried to start tapering and Mr. Reality stormed up the steps of his ivory tower, bent him over his desk and promptly pounded him in the ass. Now he's stroking his beard and pretending he has a plan, while nervously watching the calendar. They're done and they know they're done. They've been arrogantly pretending that they can quit their crack addiction any time they want, and now they're scratching their heads and trying to figure out exactly how they thought their cockamamie plan would ever work, or how exactly it was different from every other historical money printing folly.

These are faux intellectuals in the extreme. They crunch spreadsheets and apply formulas which look beautiful on paper, only to discover to their naive surprise that Mr. Reality is once again climbing the steps of their tower, ready for round two... and has no Vaseline this time around.

Wahooo's picture

Boris, don't forget we still have the insurance companies in America that require bailing. Would make sense for TBTF banks to buy wounded insurance companies. That way the banksters acquire another sixth of our economy, and run the obamacare site and all the back end transactions. When the final, awful financial frankenstein arises from the cold metal table of governance, and personal assets vaporize overnight, our H&C Leader will simply shrug and say "No one is more upset than me."

derek_vineyard's picture

they've painted themselves into a corner.......had several opportunites to change direction, but chose not to

we are fucked because of the fed, tbtf , zirp and gross overspending and all involved should be punished for their part in the violation of their fudiciary responsibilites and negligence----strip them of all their assets

Boris Alatovkrap's picture

Prisoner dilemma is two part drama... In part one, prisoner all is double-down in demonic collusion to deprive citizenry. In part two, each prisoner is alone to consider counter position from other prisoner and it is eventual to rush for close-out deal for self. Brace for rush to convert bankster shadow asset class of derivative bet to purchase REAL hard asset. Blood in street is not analogy.

kliguy38's picture

There will be taper....and for a very simple reason........they need to taper to illustrate "how important" QE really was........THEN as the market tanks they will announce the "Mother of all QEs" from Big Mama..........

Harbanger's picture

@ Lola, "There will be no taper,.."   Wow!  That's a genius prediction, how about a budget from Obama soothsayer?  He hasn't passed one yet, that's a historical 1st, what do you think, is it in the cards?

mayhem_korner's picture

      << if the Fed actually tapered*, the 10Y yield would jump by 50+ basis points in the first hour

      << if the Fed actually tapered*, the 10Y yield would jump by less than 50 basis points in the first hour 


*Fictional account.  Any resemblance to actual Fed behavior is strictly coincidence.

Boris Alatovkrap's picture

No taper, no retraction of ZIRP. Term Mismatch lend long (intrinsic characteristic of mortgage back security), borrow short (intrinsic characteristic of sovereign debt instrument) is lock fate of fiat monetary regime. Option of taper is long to be gone, only question is to remain how long is bankster class investor stay in game before cash out of shadow bank system. First trade will show 90¢ on dollar, then is 80¢, then 50¢, then mad raging dash for catching falling dagger as system implode. Air for asset bubble is like small asthmatic child lose inhaler.

new game's picture

purchase values to plummet with "value" of fiat til ? or purchase value rises as value of fiat plummets?

in or de. depends on class of good being purchased. very much mixed bag...

Hedgetard55's picture

No taper until after Santa Claws gives the boyz the bonuses they have "earned" in 2013. 

Groundhog Day's picture

If the fed owns 30% of us papeand are adding .3% a week how can they taper and let rates rise. They would shoot themselves in the foot

Dr. Engali's picture

The fed is stuck in a box. Any taper that they try to do will be quickly followed by an even larger untaper when the whole thing starts to unravel again.

americanspirit's picture

The Fed has just announced that it has a new mascot - the Tapir. Related, I believe, to the sloth. Its image will appear on the new Platinum coin.

Atomizer's picture

Last post for ZH’er. Every fucking year they do a mass advertisement to show you poor people living in poverty. You are conditioned to go spend money to help these mother fuckers out. These people don’t work and rely on aid to function under the premise to take from the rich and give to the poor mantra .


The bottom-line, the Central Planners want you to spend your money and pretend that the Q1 –Q2  contraction doesn’t exist.

Let’s look how this all plays out for the next employment/GDP report for 2014.

Django Unchained: Django Guilt

Cabreado's picture

Alternatively, rather than expend energy on exclaiming the toxic aberrration that is the Fed, you could be pouncing on the points of control that enable it, and will continue to enable it 'til it all falls down.

There is not a single part or person a la the Fed whose priority is saving the "economy" -- likewise for those who could shut the organization down in an instant.

disabledvet's picture

Fed gave us forward guidance in 2009...then hit the markets with "taper" and Fed then claimed "surprise" at market repsonse. (really? you had been saying one thing for four straight years!) now the only ones claiming a taper are Wall Street types saying "recovery is self sustaining" etc. this may in fact be true...but with the Fed all about the forward guidance even mentioning tapering let alone doing it is off the table until 2015 "at the earliest." The money center mouth pieces claiming the banks are pulling back will only make QE 4 more likely. Fisher as "viceroy chairman" will have no say in the matter. nice last minute Hail Mary though.

Herdee's picture

I'm going with Peter Schiff on the Fed just getting started on printing.Any little taper with a big market drop will produce more QE.They're trapped like Japan and in debt up to their eyeballs along with being short tax revenue.Any taper that boosts interest rates will bankrupt Uncle Sam's war machine.What am I saying?They're already insolvent.

new game's picture

histrorically 3 x gdp debt ratio starts to mathematically starve the beast. at zirp, no options but to create more debt based money for the gov to distribute to the new shit army. any change will cause major disruption, like no transfer payments, or huge spike in unemployment(actual cut to budget) and/ or a dollar collapse in confidence (as the world unloads treasuries)...and we are losing the petro dolla grip slowly but surely... all interesting, but somehow this time it will be different...


nostromo17's picture

Since QE only has effect on bank balance sheets attempting to cover the %40 paper loss of the mortgage crisis by inflating the stock market, therefore QE has never had any effect on the self sustaining of the U.S. economy. Which is to say taking QE away will have no effect on the U.S. economy going forward because QE is irrelevant.

That so much time and words are spun about QE is amazing since its just a prop, a facade, to have kept banks from going under like they should have instead of spinning into a more concentrated goup of about five monopolies as they intended to do through creating the mortgage crisis.

I suppose taking QE away may reveal the poorly built house of cards fragility...i.e. the "wealth effect" bullshit goes away.

Really though deflation remains the big risk and instead of QE to prop up banks we would better off dropping money from helicopters to the consumers to stimulate circulation of money among consumers and revive a deflating economy. But the capitalist not recognizing their own best interests will never do what needs to be done.

So irrelevant QE or not we are still on course for implosion unless the economy has been at least feabily self sustaining all along and just continues to be so, perhaps.

The beauty of economics is economists don't take credit for being ineffectual and take credit for what they did not cause, revealing they are just propoganda for the so called ruling class of the 400. How can such an unstable structure persist for long? Overweighted at the top with weak supports below only time will tell when it will collapse.


Seer's picture

I don't think that dropping money is going to do anything because the underlying issue is the lack of growth, all grounded in the fact that resources are becoming increasingly more energy-costly to obtain.  Keep in mind that what pushed us up this past bubble peak was "cheap" money (which drove over-consumption driven by an over-draw of resources [pulling forward future demand]).

Deflation has to happen.  I don't, however, believe that this will be just a matter of "adjustment;" I believe that this is one of those Great Turnings and that what is going on is that we are shedding a growth paradigm (or our grow-or-die paradigm is being forced to die).


I suspect that we've been in the Stagflation range (it's only been hidden due to the various bubbles) since 1971-ish*.  If the "Secular Cycle" is correct then we're nearing the end of the Stagflation range (of 50 to 60 years) and heading into the "Crisis Years."

* Check out inflation-adjusted wages: http://www.aboutinflation.com/salary-and-inflation/average-earnings-us/u...

nostromo17's picture

Dropping money to consumers (and not bank balance sheets) would at least return the economy to something like an economy works...consumers buying things and companies producing things for such consumers. There would be inflation which would be better than no risked priced interest rates. And consequently interest rates not artificially capped would spectrum out to price risk as rates are supposed to (high rates high risk low risk low rates not low rates for no goddamn reason except the false propoganda of "protecting us from inflation" which only protects uninvested wealth anyway (see wealthy savers)). In other words kick start a return to some sort of reality instead of a huge paper game to keep a few banks afloat that should have been destroyed for disservice to society in 2008. And so doing have us on the ledge of FInancial Catastrophe TWO the sequel to the mortgage crisis which was just greedily mispriced risk gone wild...

Seer's picture

"Dropping money to consumers (and not bank balance sheets) would at least return the economy to something like an economy works"

I'm not so certain.  I wonder whether such money wouldn't just get used to pay off existing loans.  Everything seems to circle back to the banks.  And, while not in defense of banks, it only seems like it's the right thing to do to meet one's obligations.  Encouraging people to go out and spend kind of sends the signal that one can sidestep one's obligations.  Further, people are horribly in debt because of improper spending habits; I suspect that given a little bit of money they will eye stuff that's just a little bit more and thus take on a bit more debt.

The banks make a lot of money off of the big corporate entities that would be seeing more money roll their way (from increased consumer "demand").  Hardly any sort of punishment for them I'd figure.

Though I in no way endorse it, I very much see the logic in the initial move to shore up the banking institution.  The mess that there would be with several large bank failures might end up gridlocking everything so bad there would be no conceivable way of avoiding total collapse.  If you cannot maintain books it's pretty hard to have a clue about whether you're doing well or not (managing resources).

Finally, given that the bulk of U.S. trade deficits are from energy imports I would suggest that increases in consumer spending would only increase this trade (im)balance.

Increased federal/govt debt.  Increased trade deficit.  I just don't see this as in any way an improvement.  I suspect that TPTB were/are aware of this.  The overwhelming majority of people rely on near-instant bank transactions for their consumptive needs, and with massive disturbances to the banking sector that would translate to massive disturbances to the consumer.

There's also an issue of defaults on funds associated with the performance of financials themselves.  Likely lots of people would get a good portion of their rugs pulled out from underneath them.

I just don't see there being any easy "solution."

nostromo17's picture

 QE irrelevance is also why it will not cause a great inflation leading to hyperinlation. Deflation will cause hyperinflation. The disservice of QE is it doubled the banking sector's share of the economy from 4 to 8 percent (non-productive wealth redistribution), through Fed fueled market speculation the stock market has continued to "rise" (if not in real value at least in QE deflateable nominal value) creating a bubble to be corrected when QE is stripped away. But most importantly since companies stocks have been going up or perceived to be going up in value due to QE they have no motivation to actually make money or apply resources to production...instead they can cost cut at the expense of thousands of jobs to maintain pretty quarterly reports. - All non-productive and socially destructive. The Fed only struggled to save their owners' asses the banks and so doing screwed the country some more under a huge propaganda lie they were trying to improve the economy, instead they tranferred a larger share of the remaining less wealth to the very institutions that cause the problem BANKS. And since the media is bought all we hear is the spin about QE being for the benefit of the economy when it is anything but...While you all spin QE the real economy goes about its business apparently headed to deflation no one lending a hand where its needed the most.

Don't worry about the QE bullshit. Focus on seeing Fed Heads and Bank Heads roll. Focus on getting someone else or a new FED a Fed replaced focused on stimulating the actual real economy before its too late if it isn't already too late.

Seer's picture

Pretty much agree...

My BIG VIEW of things is based in the belief that growth is pretty much over and that this is due to the depletion of Natural Capital.  The banks have been responsible for running the mirage of growth post 1971, ramping up (exponentially) each decade since.

The Fed is really now doing what most folks were doing back in the 2000s- buying over-priced assets.  These folks aren't stupid, they know that if no one else is buying that they're books basically self-destruct, and along with them the entire money-laundering System (that is fractional-reserve banking with fiat money).

Bankers really don't like holding on to physical assets (PMs might be the exception).  I therefore do no believe that they have turned 180 on some whim.

My crystal ball shows the Fed swallowing up the bad debt and then blowing up.  If TPTB survive the resulting mayhem (the people aren't so completely alienating from all social structures) then they'll ensure that the banksters be rewarded with "entry" tokens when any new game is started: take one for the team now else be run up a flagpole.

Seer's picture

"self-sustaining momentum is far from secure."

WTF is self-sustaining?

For once I'd just like to have a go on-stage in front of live human beings a shot at debating all these moronic "experts" whose proclaimations are always littered with fantasy jingoism.  Unless it's a system on par with the solar system it's NOT "self-sustaining."  These fuckers have to know that it can only ever be of a short duration.  ANYTHING can be seen as "self-sustaining" given a short enough time slice.

nostromo17's picture

You are so right. The world is so lost propaganda doesn't describe what gets promulgated. Its all just BS blather. Blind men feeling the elephant. Lets see though, "Self -sustaining momentum is far from secure" means they take credit for any momentum to the economy, implying if they take away what they are adding to momentum it may stop and transparently they are also admitting there is no momentum.  So the real meaning is, we are scared of deflation or something like that couched in a phrase that makes the ineffectual seem effectual, makes the irrelevant seem relevant, when in reality there is not one whisp of control over an economy manipulated to the ends of a non-productive sector of society called banks.

nostromo17's picture


BOA, GOLDMAN, and MORGAN G. should be broken up and destroyed and competitive smaller banks should replace them. And all those pricks at Countrywide Financial now at BOAC (as they like to call it among themselves) shouldn't have jobs and nice homes in Cleveland for example starting with their sales heads who fueled the mortgage crisis. Salesmen who like Nazi's would defend their lack of responsibility while taking credit for being great salesman because they were "just doing their job."

Seer's picture

In the U.S. it was HSBC that gave the green light on sub prime by buying out Household Finance.  As these large financial instututions go, HSBC has been fairly quick to acknowledge its fuck-ups: other than money-laundering (have to laugh given that all the fiat in circulation is really no more than "drug money") they've tended to not get caught in the criminal line-ups.

That which cannot continue forever won't.  Patience.  They're walking dead.  The day will arrive, and there's little reason to have to spend one's precious energy on pushing what is already heading toward the cliff.

TheRideNeverEnds's picture

Doesn't matter what they say, whatever it is will be spun as good news after the market goes straight up 30-40 SPX handles in 5 the milliseconds after the release. 

buzzsaw99's picture

good lord, the word "then" misused TWICE.

Reid = Douche