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What Happened The Last Time A Major Central Bank "Tapered" QE?

Tyler Durden's picture


After having followed a zero interest rate policy strategy and facing a further deteriorating economy in an environment of falling prices (deflation), the Bank of Japan (BoJ) announced the introduction of QE on 19 March 2001 and kept it in place until 9 March 2006. The BoJ chose for a very orderly and gradual unwinding of its government securities portfolio, by continuing its regular purchases of these securities (i.e a taper and not sale).  The market rejoiced at the normalization for a week or 2... before dropping 24% in the following 2 months. Of course, that was a "policy mistake"; the Fed knows this time is different.



Think 24% is ok and Fed will just rescue stocks again?... things "esclated"...

to end -75%.

Awkwardly that lines up with the 1920/30s analog we have previosuly noted...



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Wed, 12/18/2013 - 21:13 | 4259276 Cult_of_Reason
Cult_of_Reason's picture

The market was manipulated today to condition Pavlov's dogs into new response "taper is good, buy stocks".

Conditioned Stimulus was paired with an Unconditioned Stimulus that Bernanke hoped would cause automatic Unconditioned Response in the future.

Wed, 12/18/2013 - 21:16 | 4259302 LetThemEatRand
LetThemEatRand's picture

I could not agree more.  Every move of this market over the last 2+ years has been seemingly scripted to reflect the desired message, including the regular PM slamdown every time it becomes obvious that fundamentals should cause the prices to rise.  It's amazing what a few trillion dollars of someone else's money will make possible.

Wed, 12/18/2013 - 21:21 | 4259307 Cult_of_Reason
Cult_of_Reason's picture

Classical Conditioning (also Pavlovian conditioning):

Conditioned Stimulus (Taper) was paired with an Unconditioned Stimulus (Higher Stock Prices) that Bernanke hoped would cause automatic Unconditioned Response (Buy Stocks) in the future.

After pairing is repeated, although some learning may occur after only one pairing, the organisms exhibit the UR (Buy Stocks) in response to the CS (Taper) when presented alone.

Wed, 12/18/2013 - 21:21 | 4259315 LetThemEatRand
LetThemEatRand's picture

If you put a monkey in a cage and he can press a button with his right hand to receive food every time he presses it, or a button with his left hand to receive cocaine at random intervals, he'll get blisters on his left hand hitting the cocaine button while he slowly starves to death.  

Wed, 12/18/2013 - 21:33 | 4259342 OutLookingIn
OutLookingIn's picture

The Fed chairman wears NADA!

Its the ToTo economy.

Taper-on, Taper-off.

So, deck the halls with boughs of folly. With dreams of a big bonus in your head!

Thu, 12/19/2013 - 01:07 | 4259796 Manthong
Manthong's picture

it’s easy to be sleazy.. ask Jamie or Lloyd.

Ask Bernie or Jon if you cannot avoid

..the temptation to gamble your savings deployed.

And your wealth that they’re happy to watch be destroyed.

ho ho ho mo fo..

Thu, 12/19/2013 - 07:09 | 4260102 GetZeeGold
GetZeeGold's picture



We're gonna print less than before......and that's how you move a market.

Thu, 12/19/2013 - 09:21 | 4260245 The Mist
The Mist's picture

This 'taper' is a non-event. From 85 to 75? That change is not only arbitrary but also irrelevant, it's only a minor change in degree.

What it shows? It shows that the FED has no idea what they're doing, but they've hit the unemployment level they aimed to achieve with QE, so they couldn't just continue the exact same way as before without arousing suspision. How to solve it? Give a MINOR decrease to the QE program and claim you're tapering, because all is well.

Thu, 12/19/2013 - 01:26 | 4259820 long-shorty
long-shorty's picture

damn LTER, you are on fire. should you ever visit these parts, feel free to stop in for dinner.

Thu, 12/19/2013 - 03:53 | 4259975 Wyatt Junker
Wyatt Junker's picture

What happens when there's no taper?  That's easy.  Your asshole slams shut.

Thu, 12/19/2013 - 02:11 | 4259877 A Dollar Short
A Dollar Short's picture

Baaadd !

Thu, 12/19/2013 - 03:56 | 4259982 AngelEyes00
AngelEyes00's picture

Stupid Monkey!

Thu, 12/19/2013 - 04:19 | 4260005 Leveraged Algorithm
Leveraged Algorithm's picture

Not accurate - you may have been taught this at a young age but the last decade has proven the monkey/cocaine theory in error. It was bad research - period. Not that I support QE - but lets remember the framing of the research ahead of testing leads to poor results. That is exactly what the Fed's smart guys have done.

QE may result in a Japan like moment - or frankly it may be much worse - especially for the world. Act accordingly.....

Wed, 12/18/2013 - 22:00 | 4259412 Mugatu
Mugatu's picture

I guess you were the voice of reason who was complaining when QE was stoking gold up from 900 to $1900 in 4 years.  Lets face it, every asset class (including metals) has been pumped up by the Fed.  Gold is just the first asset class to fall.  The rest of them will in time too.  In the end when everyone is poor how will any asset class go higher?  The fundamentals for bread are probably great in Ethiopia but considering nobody can afford bread how high can the price go?

Wed, 12/18/2013 - 22:28 | 4259443 LetThemEatRand
LetThemEatRand's picture

QE wasn't "stoking" gold, so much as gold was responding to a devalued dollar.   Wars were fought and continents conquered over gold before there were "asset classes."   Paper gold will likely be slammed down if there is general deflation in paper assets and real estate, so we agree as far as that goes.  How long they can keep that charade going is anyone's guess.  So far, just about everyone I've read who tries to call it has been wrong.

Thu, 12/19/2013 - 04:29 | 4260016 Leveraged Algorithm
Leveraged Algorithm's picture

It seems that everyone missed a really important comment from "Big Ben" when he primed the pump by saying "other central banks can purchase corporate bonds and other securities" and we cannot because of the law. Japan can and is buying everything - Watch closely while a new law allows the Fed to buy ANY securities - if they are not already. You thought Obama care would never pass?

Sun, 12/22/2013 - 01:42 | 4267863 TheRedScourge
TheRedScourge's picture

As someone who is watching the gold markets intently, I can say rather confidently that the all in sustaining cost of mining an ounce of gold is roughly $1250 now, not counting any writedowns from falling demand rendering mines uneconomical, whether due to manipulation or not. Grades are falling, exploration is yielding fewer big mines, and costs are rising, especially energy as the cheap stuff gets used up. It will not be heading down to $900 again, unless we see a hell of a lot of deflation.

Wed, 12/18/2013 - 21:53 | 4259401 Colonel Klink
Colonel Klink's picture

Me thinks Pavlov's dog is going to take a beating!

Wed, 12/18/2013 - 23:47 | 4259672 rosiescenario
rosiescenario's picture

....thank you B.F. Skinner........I agree, they are teaching the algos a new trick....most of the newer algos have built in modification programs which can adapt rapidly to changing conditions. Unfortunately, the algos are a bit like my rat terriers....once they lock onto a scent, there is not much thinking taking place as they are hard wired to chase, a genetic trait they share with momo investors in general.

Thu, 12/19/2013 - 01:59 | 4259860 Life of Illusion
Life of Illusion's picture



Richard Koo "Balance Sheet Recession" as it continues.

Wed, 12/18/2013 - 21:07 | 4259283 DirkDiggler11
DirkDiggler11's picture

And the market was manipulated yesterday, and will be tomorrow, and the day after that and ( insert infinity symbol here)

Wed, 12/18/2013 - 21:16 | 4259306 LetThemEatRand
LetThemEatRand's picture

I think he's going by Prince again.  Oh, sorry.  Different symbol.

Wed, 12/18/2013 - 21:10 | 4259291 HamyWanger
HamyWanger's picture

The taper is only -$10B/month, still $75B/month left.

You're way overblowning this. 

Wed, 12/18/2013 - 21:56 | 4259395 Cult_of_Reason
Cult_of_Reason's picture

Markets (non-manipulated) are supposed to be forward-looking, like 6-12 months forward-looking and pricing in today no QE in 6-12 months from today.

Wed, 12/18/2013 - 23:50 | 4259685 rosiescenario
rosiescenario's picture

...I'd say the markets today were pricing in no taper which will happen about 5 seconds after a 300 DOW point drop.

Does anyone seriously believe that Ben is going to phuque with Wall Street? Those are his bros.He is counting on them to come through with speaking engagements at $400k a pop after he retires.


...and I rather doubt that Yellen will want to lead off with a market crash.


After the dollar loses its status as the reserve currency, maybe then the Feds might seriously consider really tapering.

Thu, 12/19/2013 - 08:27 | 4260105 GetZeeGold
GetZeeGold's picture



The taper is only -$10B/month, still $75B/month left.


5 freshmen Econ 101 students blew their fuses and junked that 6.....and expected to rise further.


Forgive them.......cause they just don't have a clue.

Thu, 12/19/2013 - 04:27 | 4260015 AngelEyes00
AngelEyes00's picture

Yes, SEVENTY FIVE  BILLION a month is nothing to sneeze at.   still a lot of inflation for Ferrari's and art.   If they had said tapering by 10 billion a month until QE zeros out then panic selling may have ensued.  But instead they parsed their words even on tapering, by saying they may adjust it up later.  So it's still QE game on, nothing has changed except a small (possibly temporary) reduction.  And who knows how long it will remain at 75b.  With ongoing adjustments we could be 10 years down the road with 75b or 175 billion a month.  Investors were relieved the news wasn't more taperish.

Wed, 12/18/2013 - 21:12 | 4259292 walküre
walküre's picture

Anyone have a suggestion where the money would go instead? Zirp in effect and all other CBs are in the same boat. Market will stay flat from here on out for the next couple years. The occasional IPO might be worth playing but for rest of the market, the upside is very very limited. Dividend stocks are less vulnerable to a correction. Unless a big shareholder needs to raise funds and liquidate a massive portfolio, I don't see the downside scenario playing out.

Wed, 12/18/2013 - 21:30 | 4259340 ZeroPower
ZeroPower's picture

HY credit. Still space to run. The shittier the credit, the better.

Thu, 12/19/2013 - 02:50 | 4259924 disabledvet
disabledvet's picture

That was the play going into this spring. The Fed crushed that play...not that the equity space cared. Big mistake assuming "dividend players are safe." An IPO market like this can make your industry irrelevant. The move in Twitter has been astounding...WAY underpriced IPO imho. One could look at a company raising its dividend as bearish actually. A "defensive move" given what's going on in the market as a whole. Tesla shooting up to 200 from here wouldn't surprise me one bit. Nor would a massive roll out of their "Solar City" network. This does bring "displacement theory" into play however.

Wed, 12/18/2013 - 21:49 | 4259390 the question
the question's picture

It would go to cash. But only until the market corrects. Then back to equities.

Wed, 12/18/2013 - 23:04 | 4259564 Being Free
Being Free's picture

Anyone have a suggestion where the money would go instead?

A good question.

I would say PMs.  But then, it doesn't appear to be what the "market" is saying.  Draw your own conclusions on that point but as Patrick Henry put it:

I have but one lamp by which my feet are guided, and that is the lamp of experience. I know of no way of judging of the future but by the past.

and given the very long history we have to judge by it seems, to me, PM's are still the place to be running to despite the false flags.


Sun, 12/22/2013 - 01:51 | 4267873 TheRedScourge
TheRedScourge's picture

JP Morgan's actions seem to agree lately.

Wed, 12/18/2013 - 23:55 | 4259687 rosiescenario
rosiescenario's picture

"Anyone have a suggestion where the money would g...?"


Well, we know it has already gone to art and various other collectibles, homes in the Hamptons, exotic cars, and $400k watches.


....and we also know where it has not gone, which fully explains why the serfs are buying guns and ammo.

Wed, 12/18/2013 - 21:18 | 4259305 Dr. Engali
Dr. Engali's picture

Down 75% would bring the market down to fair value. If we could get there without artificial fed intervention propping this shit up then we could find a true bottom.

Wed, 12/18/2013 - 21:43 | 4259367 BandGap
BandGap's picture

Never gonna happen. The Fed has hung it's hat on the stock market being the bell weather for the health of the economy. Starting out with that misguided premise, if the market drops 10% they are ging to knee jerk the hell out of stimulus efforts.

My hope is that this will accelerate the decline.

Thu, 12/19/2013 - 02:36 | 4259908 disabledvet
disabledvet's picture

You have to have stimulus that works. So far all that's been an epic failure. ACA, Syria...rounding up the UN troupe for "Plan Save Fukushima." Nothing but crickets. We 'll see if this budget deal is the start of something truly material in DC. I would argue that deal is the first good news in six years actually. Whether that means the cop is on the beat here is another thing entirely.

Thu, 12/19/2013 - 07:09 | 4260101 Rip van Wrinkle
Rip van Wrinkle's picture

Never is one hellofa long time.

Wed, 12/18/2013 - 21:18 | 4259308 Uber Vandal
Uber Vandal's picture

Well, I was mainly right....

But, saying is not doing. Lucy (Fed) can still remove the football (Taper) before Charlie Brown (Retail??) gets there.....

Wed, 12/18/2013 - 21:22 | 4259313 frankTHE COIN
frankTHE COIN's picture

Patience fellas. Catalysts come from out of the Blue. In the mean time scalp around your main position ( Short term Buy some obvious opportunities swing or Day trading )
You'll keep your main position intact and have a small profit to break even while you await the Main Event.

Thu, 12/19/2013 - 01:09 | 4259803 disabledvet
disabledvet's picture

"swing traders." that's just the beginning of "bull crazy pants world." good start though. we're well past "buy the dips, sell the rips" now. and yes there are behavioral algo's to trade the trader here as well. at some point we might even get some real banking actually.,_Pennsylvania what should you be buying right now? here would be my top pick: "no earnings/no problem."

Wed, 12/18/2013 - 21:29 | 4259335 max2205
max2205's picture word, penny stocks will be the last blow off

Wed, 12/18/2013 - 22:28 | 4259473 RaceToTheBottom
RaceToTheBottom's picture

I am certain the fact that the planned top of Jan 16 2014 is right after a yearly option top is just a coincidence.

Wed, 12/18/2013 - 22:30 | 4259474 surf0766
surf0766's picture

The taper will be turned off early next year. They can and will never tapper. This is just a bluff.

Wed, 12/18/2013 - 23:21 | 4259552 Number 156
Number 156's picture

I agree. This so-called taper is planned for January. I believe February-March is when the action really begins.

And with this bunch, watch what they do, not what they say they're going to do.


From This article July 18th:

Bernanke also reiterated Thursday that the tapering down of the bond purchases is heavily dependent on continued growth in the economy and job market.

"Obviously, we're going to look at the data," he said.

Yeah, indeed you will.
Lets see if Janet Yellen can look a steamroller in the headlights come next year's jobless numbers.
In fact, Im sure they already have a good idea what the numbers are going to be.
(Not the phony numbers we see, but the real numbers THEY see.)

Thu, 12/19/2013 - 02:21 | 4259896 A Dollar Short
A Dollar Short's picture

You see the light - Number 156.

Wed, 12/18/2013 - 23:57 | 4259695 rosiescenario
rosiescenario's picture

I suggested in a different post on ZH that we should really talk about Ben's "Virtual Taper" and what a normal person would consider a "True Taper". The Virtual Taper is created through the application of warm, humid air to vocal cords accompanied by the correct facial expressions. The "True Taper" will not be brought to us by the Fed but by a large Black Swan....such as the dollar losing its reserve currency status.

Thu, 12/19/2013 - 01:25 | 4259821 Renewable Life
Renewable Life's picture

And when they taper, how will they monetize the 2 trillion yearly deficit???

Oh right, the Chinese will buy it for shit yields right???? Wrong!! Probably a major global military snafu on the horizon, I wonder if that's fucking priced into Dow 17,000 and this BS taper talk???

Wed, 12/18/2013 - 22:51 | 4259524 holdbuysell
holdbuysell's picture

Yellen is so screwed starting January 14.

Wed, 12/18/2013 - 23:03 | 4259565 FieldingMellish
FieldingMellish's picture

ZeroHedge... forever looking for that market crash... ah well... maybe next year or the year after... I'm sure its just around the corner and then gold will spike "to da moon"... LOL!

Wed, 12/18/2013 - 23:18 | 4259606 Harry Dong
Harry Dong's picture


sorry, I'm not necessarily agreeing with you but I do have to say that I don't quite see the correlation.

That said, we are all Zimbabwains now.

Thu, 12/19/2013 - 07:25 | 4260108 GetZeeGold
GetZeeGold's picture



ZeroHedge... forever looking for that market crash


Already happened in 2008.....been living on unicorn farts and hot money ever since.


It's not going to crash.......we can print into oblivion......and into oblivion we shall gladly go.


Unless someone screws it up.....and that's totally possible.

Wed, 12/18/2013 - 23:20 | 4259617 Number 156
Number 156's picture

You cannot use the markets as a reliable economic indicator.
It doesn't matter if it continues or not, at least, not to the average guy. 

The market is a place where price discovery takes place. That has been broken long ago.
If the markets = economy, then why so many municipal bankruptcies? Why are so many children in NY homeless? Why are so many out of work? Why is home ownership at such a low?

So sit back, watch and learn. The market is a red herring meant to take your eye off the ball, only a facade held in place by bailing wire and duct tape.

Thu, 12/19/2013 - 01:58 | 4259838 A Dollar Short
A Dollar Short's picture

The dead cat bounce is over.

Everyone needs

a hardhat..

Thu, 12/19/2013 - 01:51 | 4259853 A Dollar Short
A Dollar Short's picture

The dead cat bounce is over.

Everyone needs

a hardhat..

Thu, 12/19/2013 - 00:00 | 4259704 rosiescenario
rosiescenario's picture

....another youngster who has never experienced a real bear market...stick around and get educated.

Thu, 12/19/2013 - 01:08 | 4259801 Tall Tom
Tall Tom's picture

You think that I want Gold to spike? Only COMPLTETE IDIOITS BTFATH.


I want Gold Price to DECLINE. It gives me a great satisfaction knowing that United States Physical Gold Deposits are being DEPLETED as the Asians are laughing at the IDIOCY.


Most Large Banks, along with many other Soverign Central Banks, are NET LONG in Gold and are in the process of accumulating.


It will be Just Desserts for all of the starving Americans whom lacked foresight. I will leave this Nation as it turns into a Detroit, laughing at people as yourself.


Have fun watching YOUR CHILDREN STARVE and sell themselves, their bodies for sex, in the streets for food as you so rightfully deserve to watch it.


I am happy that they tapered. I want them to TERMINATE QE. Tapering is just a step in the right direction. In that way we can get to the root of the TRUTH when it concerns Price Discovery.


Collapse baby collapse..

Thu, 12/19/2013 - 03:13 | 4259948 duckandcover
duckandcover's picture

TT, Tapering is just a step in the right direction.  Please think about this. We are still taking 75 Billion steps per month in the wrong direction.

Thu, 12/19/2013 - 08:10 | 4260130 Tall Tom
Tall Tom's picture

Yes. but isn't taking 75 Billion Steps in the wrong direction just a little bit better than taking 85 Billion Steps in the wrong direction?


As I previously.wrote I want to see us take ZERO STEPS in the wrong direction as I want QE TERMINATED.


A journey begins with the first step...or 10 Billion steps in this case. Let's hope that we stay on the path to recovery and not relapse.


Of course we might not have hit bottom yet. (I still hold a very slim hope...very slim. It is like just a smidgeon of a spark, barely discernable. But it seems to be flickering.)


Ever hear "Hope" by Klattu? Listen to the entire album. I think it is excellent. It is an entire story about a race of aliens. Somewhat applicable to today.

Hope is like a lighthouse keeper's beam.
Hope - the master cobbler of our dreams.
For Hope believes in desert streams.
The mightiest of stars,
the microcosm in a jar -
vast or small they all revolve on Hope

Hope - the guardian angel of the dove.
Hope - a gift of guidance from above.
For Hope is the heart in mother's love.
No plans could be conceived,
no ships could fare the seas
for there would be no courage were it not for Hope.

Now the path before us lies before our very eyes -
don't you see?
And it leads up to the gateway - lead me through.
Don't you see?

Then come and take my hand, raise up your head
and dry your eyes for up ahead I see
- woh woh yeah -
a ray of peace a-shining on me.

So let us feel Hope
and feel the sunrise in our minds.
To give Hope is to enlighten all mankind.
Ah but lose Hope and life seems black as blind.
When faith gives way to fear,
when motivation disappears -
all is lost if one abandons Hope,
all is lost if one abandons Hope

Thu, 12/19/2013 - 00:12 | 4259718 Rukeysers Ghost
Rukeysers Ghost's picture

Janet Yellen: "You've got me turning up and turning down. I'm turning in I'm turning 'round. I'm turning Japanese. I think I'm turning Japanese, I really think so."

Thu, 12/19/2013 - 01:13 | 4259810 The Heart
The Heart's picture


Thu, 12/19/2013 - 01:52 | 4259851 Harry Dong
Harry Dong's picture

What does this have to do with it?

But now that you bring it up, why in world would you have kids in such a horrible circumstances? I'd donate a few gross of prophylactics if it helps.

Thu, 12/19/2013 - 02:09 | 4259872 ThirdWorldDude
ThirdWorldDude's picture

Kudos for the initiative, but I have my reasonable doubts it'll fall to deaf ears.

The Jesuits in control of Rome's Harlot are BFFs with the Nazi in control of Tel Aviv. Pope Francis is only continuing the millenia old practice of "listen to what I say, but look not at what I do."

The Jesuits, The Nazis & The Holy Bible


Res, non verba!

Thu, 12/19/2013 - 01:50 | 4259850 A Dollar Short
A Dollar Short's picture

It's controlled gagetry.., nothing more.

Thu, 12/19/2013 - 02:06 | 4259868 q99x2
q99x2's picture

The Japanese did not have their Central Bank's computers and software directly creating the graphs of their stock indexes. The United States does.

Thu, 12/19/2013 - 05:24 | 4260057 Clowns on Acid
Clowns on Acid's picture

Yeh but the Japs did it manually and in r/t.

Thu, 12/19/2013 - 02:06 | 4259869 Missiondweller
Missiondweller's picture

Great post Tyler(s)!

Posts like this is why I love Zerohedge.

Thu, 12/19/2013 - 02:18 | 4259889 Peter Pan
Peter Pan's picture

I wish people would stop using that last chart because it is something I would expect from a corrupt BLS.

The left and right axis have no corelation, therefore the seeming similarity to 1929 is bunkum.

My only other comment is that the boys in ivory towers have some incredible means at their disposable to keep the show going so let's not stick a death certificate on anything that still has respirators, ventilators, drips, and monitors attacehd to it.

When she blows it will be like pulling out the cork out of an elephant's ass when it's suffering from extreme diarhoea.

Thu, 12/19/2013 - 02:32 | 4259900 A Dollar Short
A Dollar Short's picture

With bleeding hemorrhoids, to boot.

Thu, 12/19/2013 - 04:04 | 4259988 alfbell
alfbell's picture



Fed is tapering because it has bought up and shredded the majority of MBSs, which if they had been left out there in the economy, would've killed the banking system and created untold havoc (i.e.,10 mortgages on the same property in 10 different tranches). The Fed is just doing its job and protecting the banks and more so, the big power elite capital owners at the top. 

Thu, 12/19/2013 - 05:21 | 4260055 Clowns on Acid
Clowns on Acid's picture

O so its that easy... just tear up the MBS....dumbkoff....

Thu, 12/19/2013 - 06:17 | 4260076 o2sd
o2sd's picture

Actually, it is. The Fed purchases agency MBS. Agencies are funded by Treasury. Treasury sells T-Bills to Fed. Rinse repeat. It is just a game of musical chairs, except nobody really knows what will happen when the music finally stops.


Thu, 12/19/2013 - 04:11 | 4259995 alfbell
alfbell's picture



US bond buying will continue by foreign entities and governments. They need a safe haven and the US is the ONLY game in town. The US economy is the strongest around, and most importantly... has the biggest, baddest military and will continue to enforce the USD as the world reserve currency. And the OPEC guy's new currency will be pegged to the USD.  

Where would the smart, conservative capital hide or fly to... the euro? the yuan? the yen? the swiss franc? I don't think so. 

Sorry Armageddites and gold bugs. No collapse for a long long while, if ever.

Thu, 12/19/2013 - 05:01 | 4260039 fiftybagger
fiftybagger's picture

MDB?  Is that you?

Thu, 12/19/2013 - 07:26 | 4260110 GetZeeGold
GetZeeGold's picture



I doubt it.....he would want to take credit for that.

Thu, 12/19/2013 - 05:51 | 4260065 Bearwagon
Bearwagon's picture

That you, Tepper .. err ... Taper ..errm ...however ... have a look at this:
I wouldn't bet that it will be pegged to the $ for long ....

Thu, 12/19/2013 - 08:43 | 4260192 auric1234
auric1234's picture

Your "safe haven" has a half life of 4 years:


Thu, 12/19/2013 - 04:35 | 4260013 rp1
rp1's picture

There's still QE, it's just less from the Fed.  The BoJ is doing QE.  They will do even more QE any time the JGB market has a tantrum.  Also, unlike America, which seems to have some disagreements about what is fair, Japan actually voted for this policy.  It's just too bad about all the secrecy bill shit, but hopefully that is turned back.

I think America is going to get its crash, but the rest of the world seems ok.  Canada for example, peaked in 2011 with commodities and house madness, but since then the boil has come off.  It may yet crash but there's a lot of innovation going on and people are spending.  The Canadian dollar looks headed into the toilet, but only against the US dollar.  If I could hazard a guess, I'd say that the tension will mount in the US as your currency and market appreciates.  I hope it's not a bitcoin thing.  Good luck.

Thu, 12/19/2013 - 04:34 | 4260021 GFORCE
GFORCE's picture

Great analysis. Crossroads now. The Dow needs to trade above the high to see a further rally into exhaustion. The correction will be brisk.

If it can't get above the highs then an orderly correction to support.

But when does Wall St do orderly?

Thu, 12/19/2013 - 05:03 | 4260040 samcontrol
samcontrol's picture


You are confusing animals for people.

Thu, 12/19/2013 - 05:17 | 4260050 Yen Cross
Yen Cross's picture

    I saved this piece for everyone that thinks Europe is in good shape. In retrospect I wonder if this was because of advanced notice that Bernankenstein was going to taper?

  MONEY MARKETS-ECB halts year-end LTRO paybacks as liquidity squeeze bites | Reuters


Thu, 12/19/2013 - 05:34 | 4260062 ebworthen
ebworthen's picture

Oh sure.

The economy and employment are so good, they only cut $5 Billion from MBS purchases and $5 Billion from Treasury purchases.

Any time an addict and their enabler tell you they are going to solve things by "cutting back" you should run in the other direction.

Why not cut $20 Billion?  $30 Billion?  Or even half down to $42.5 Billion?

"Soft landing?"  C'mon Ben and Yellen and FED, why not?

Chicken?  Or are you providing Heroin?

Thu, 12/19/2013 - 05:58 | 4260066 alfbell
alfbell's picture



Seriously... since 2009, how many times have so many on this site and so many of our non-mainstream pundits said... everything is going to collapse; this can't go on much longer; the bond market will revolt and interest rates are going to climb; inflation will go to 25% with all of this printing; the euro zone will break up in less than a year; the US will collapse; peak oil is here; and on and on and on?

How long have the preppers been prepping for Armageddon (which is always going to happen by the end of each year)?

Obviously not in the know. No idea of what is going on and what will happen in the short, mid or long term future.

These guys can continue this long slow burn for a long time. The EU and Japan wlll go down long before the USA does. The US government, military, and The Fed (the BIS and IMF) can keep things going for a long time. The USD as reserve currency isn't going away any time soon.

Goldbugs and preppers have the strongest bias that I've ever experienced. Only one lense from which to view things.

C'mon guys. Face the music... major gas and oil in N. Dakota and Texas, and we haven't even opened up Alaska and other areas (which will be done whenever a crunch comes); Mexico just opened their oil fields up to the world; manufacturing is on its way up; corps are coming back to the USA; tech and biotech are booming; capital is moving all around; etc. etc. It's just out with the old and in with the new. Capital has "declared bankruptcy" and moved on... leaving all the debt and destruction behind for all the losers.


Thu, 12/19/2013 - 06:33 | 4260084 o2sd
o2sd's picture

Nothing has changed. Technology is replacing labour, has been for a century, still is. 100 Million uneductated dependents are not going to go away. To address your absurd reasons in order.

Oil - fuels automation and technology which displaces more labour.

Manufacturing - manufacturing is improving, but manufacturing jobs continue to decline. Why? Automation.

Technology - displaces labour with every innovation.

Capital - Is irrelevant unless it is directed to technology, and when that happens, more labour is displaced. When it doesn't it just becomes a balance sheet liability the bank has to give to the government (tax payer) to carry.

Self-entitled, fat asses are not going to go gently into the night. There will be two Americas. One where the technologists and military reside, and the other a third-world crime ridden cesspool.

Thu, 12/19/2013 - 07:29 | 4260111 jughead
jughead's picture

Thing is, even long slow burns usually end with a big bang.  Nuff said.

Thu, 12/19/2013 - 08:06 | 4260135 A82EBA
A82EBA's picture

OPEC soon accepting other than usd for oil is where things get started.enter petro-yuan

Thu, 12/19/2013 - 08:11 | 4260138 alfbell
alfbell's picture



I'm not saying all will be well and the future looks rosy. How could that be with the existing system? I'm just saying there will be no Armageddon in the immediate future and that this system (welfare/warfare state) will continue along at a slow burn because TPTB have the force and means to make it so. Will unemployment go up? Yup. Will the government expand welfare (bread and circuses)? Yup. Will the middle class disappear? Yup. Will more and more people be marginalized? Yup. Will money as debt continue to degrade the society? Yup. I'm just saying that stacking gold and silver and moving into a cave with your guns and ammo is not the best path to take, because you'll be sitting in that cave for a long long time (while the smart people are making the best of life). The smart people who are educated in the right areas, possess the needed skills to exchange for their livelihood, and who are both utilizing the system to their advantage and avoiding being trampled by the system, will be the survivors who will thrive and not do so badly.

We are going high tech. A high tech civilization will have a lot of collateral damage. It will be hard for the masses to adjust. There may be de-population on a larger scale than anticipated. We are going into chaos and a smaller group will emerge from it. Only those who can stay current and offer value to the society will be able to exchange for a decent lifestyle. The herd will thin.

Fri, 12/20/2013 - 03:00 | 4263101 o2sd
o2sd's picture

The problem is mobility. The government will continue to buy votes with social welfare, so the technologists are going to have to pay more and more taxes. Eventually, either the technologists will leave, or the welfare state will go bankrupt. Looking at it historically, it is more likely the technologists will begin to leave. Right now there isn't anywhere to go, but that will change. To keep technical people, you need a good political system, and the US political system is deterioating fast. But before that happens, you will see more and more gated communities being built, with heavily armed security guards. And they wont be small either, they will be fully serviced and eventually the size of towns.

I do, however, agree with you that stacking precious metals is a fairly pointless defensive strategy against all this. Silver and gold have industrial uses, but not nearly as useful as Lithium or Aluminium in the coming age. Sure, if you are not a technologist, then you will need to survive out with the apes in the general population. Ammo and food might be useful, but more useful will be allies, friends and community. It is the loners that get knocked of first in a crisis, because nobody likes or cares about them. 

The current financial system however, is screwed. The entire financial system is premised on (a) inflation and (b) compound interest. Inflation cannot exist in a technologically advancing society, because automation is deflationary. And compound interest will always create monetary instability because non-linear functions have no equilibrium condition, and hence can never be stable. So there will be a huge financial crash. The surprise to most people after a period of adjustment, is how inconsequential the crash of the financial system actually was. It will be like waking from a dream.

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