Guest Post: 8 Ways The Taper Is Going To Affect You And Your Family

Tyler Durden's picture

Submitted by Michael Snyder of The Economic Collapse blog,

The unelected central planners at the Federal Reserve have decided that the time has come to slightly taper the amount of quantitative easing that it has been doing.  On Wednesday, the Fed announced that monthly purchases of U.S. Treasury bonds will be reduced from $45 billion to $40 billion, and monthly purchases of mortgage-backed securities will be reduced from $35 billion to $30 billion.  When this news came out, it sent shockwaves through financial markets all over the planet.  But the truth is that not that much has really changed.  The Federal Reserve will still be recklessly creating gigantic mountains of new money out of thin air and massively intervening in the financial marketplace.  It will just be slightly less than before.  However, this very well could represent a very important psychological turning point for investors.  It is a signal that "the party is starting to end" and that the great bull market of the past four years is drawing to a close.  So what is all of this going to mean for average Americans?  The following are 8 ways that "the taper" is going to affect you and your family...

1. Interest Rates Are Going To Go Up

Following the announcement on Wednesday, the yield on 10 year U.S. Treasuries went up to 2.89% and even CNBC admitted that the taper is a "bad omen for bonds".  Thousands of other interest rates in our economy are directly affected by the 10 year rate, and so if that number climbs above 3 percent and stays there, that is going to be a sign that a significant slowdown of economic activity is ahead.

2. Home Sales Are Likely Going To Go Down

Mortgage rates are heavily influenced by the yield on 10 year U.S. Treasuries.  Because the yield on 10 year U.S. Treasuries is now substantially higher than it was earlier this year, mortgage rates have also gone up.  That is one of the reasons why the number of mortgage applications just hit a new 13 year low.  And now if rates go even higher that is going to tighten things up even more.  If your job is related to the housing industry in any way, you should be extremely concerned about what is coming in 2014.

3. Your Stocks Are Going To Go Down

Yes, I know that stocks skyrocketed today.  The Dow closed at a new all-time record high, and I can't really provide any rational explanation for why that happened.  When the announcement was originally made, stocks initially sold off.  But then they rebounded in a huge way and the Dow ended up close to 300 points.

A few months ago, when Fed Chairman Ben Bernanke just hinted that a taper might be coming soon, stocks fell like a rock.  I have a feeling that the Fed orchestrated things this time around to make sure that the stock market would have a positive reaction to their news.  But of course I absolutely cannot prove this at all.  I hope someday we learn the truth about what actually happened on Wednesday afternoon.  I have a feeling that there was some direct intervention in the markets shortly after the announcement was made and then the momentum algorithms took over from there.

In any event, what we do know is that when QE1 ended stocks fell dramatically and the same thing happened when QE2 ended.  If you doubt this, just check out this chart.

Of course QE3 is not being ended, but this tapering sends a signal to investors that the days of "easy money" are over and that we have reached the peak of the market.

And if you are at the peak of the market, what is the logical thing to do?

Sell, sell, sell.

But in order to sell, you are going to need to have buyers.

And who is going to want to buy stocks when there is no upside left?

4. The Money In Your Bank Account Is Constantly Being Devalued

When a new dollar is created, the value of each existing dollar that you hold goes down.  And thanks to the Federal Reserve, the pace of money creation in this country has gone exponential in recent years.  Just check out what has been happening to M1.  It has nearly doubled since the financial crisis of 2008...

M1 Money Supply 2013

The Federal Reserve has been behaving like the Weimar Republic, and this tapering does not change that very much.  Even with this tapering, the Fed is still going to be creating money out of thin air at an absolutely insane rate.

And for those that insist that what the Federal Reserve is doing is "working", it is important to remember that the crazy money printing that the Weimar Republic did worked for them for a little while too before ending in complete and utter disaster.

5. Quantitative Easing Has Been Causing The Cost Of Living To Rise

The Federal Reserve insists that we are in a time of "low inflation", but anyone that goes to the grocery store or that pays bills on a regular basis knows what a lie that is.  The truth is that if the inflation rate was still calculated the same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.

Most of the new money created by quantitative easing has ended up in the hands of the very wealthy, and it is in the things that the very wealthy buy that we are seeing the most inflation.  As one CNBC article recently stated, we are seeing absolutely rampant inflation in "stocks and bonds and art and Ferraris and farmland".

6. Quantitative Easing Did Not Reduce Unemployment And Tapering Won't Either

The Federal Reserve actually first began engaging in quantitative easing back in late 2008.  As you can see from the chart below, the percentage of Americans that are actually working is lower today than it was back then...

Employment-Population Ratio 2013

The mainstream media continues to insist that quantitative easing was all about "stimulating the economy" and that it is now okay to cut back on quantitative easing because "unemployment has gone down".  Hopefully you can see that what the mainstream media has been telling you has been a massive lie.  According to the government's own numbers, the percentage of Americans with a job has stayed at a remarkably depressed level since the end of 2010.  Anyone that tries to tell you that we have had an "employment recovery" is either very ignorant or is flat out lying to you.

7. The Rest Of The World Is Going To Continue To Lose Faith In Our Financial System

Everyone else around the world has been watching the Federal Reserve recklessly create hundreds of billions of dollars out of thin air and use it to monetize staggering amounts of government debt.  They have been warning us to stop doing this, but the Fed has been slow to listen.

The greatest damage that quantitative easing has been causing to our economy does not involve the short-term effects that most people focus on.  Rather, the greatest damage that quantitative easing has been causing to our economy is the fact that it is destroying worldwide faith in the U.S. dollar and in U.S. debt.

Right now, far more U.S. dollars are used outside the country than inside the country.  The rest of the world uses U.S. dollars to trade with one another, and major exporting nations stockpile massive amounts of our dollars and our debt.

We desperately need the rest of the world to keep playing our game, because we have become very dependent on getting super cheap exports from them and we have become very dependent on them lending us trillions of our own dollars back to us.

If the rest of the world decides to move away from the U.S. dollar and U.S. debt because of the incredibly reckless behavior of the Federal Reserve, we are going to be in a massive amount of trouble.  Our current economic prosperity greatly depends upon everyone else using our dollars as the reserve currency of the world and lending trillions of dollars back to us at ultra-low interest rates.

And there are signs that this is already starting to happen.  In fact, China recently announced that they are going to quit stockpiling more U.S. dollars.  This is one of the reasons why the Fed felt forced to do something on Wednesday.

But what the Fed did was not nearly enough.  It is still going to be creating $75 billion out of thin air every single month, and the rest of the world is going to continue to lose more faith in our system the longer this continues.

8. The Economy As A Whole Is Going To Continue To Get Even Worse

Despite more than four years of unprecedented money printing by the Federal Reserve, the overall U.S. economy has continued to decline.  If you doubt this, please see my previous article entitled "37 Reasons Why 'The Economic Recovery Of 2013' Is A Giant Lie".

And no matter what the Fed does now, our decline will continue.  The tragic downfall of small cities such as Salisbury, North Carolina are perfect examples of what is happening to our country as a whole...

During the three-year period ending in 2009, Salisbury’s poverty rate of 16% was about 3% higher than the national rate. In the following three-year period between 2010 and 2012, the city’s poverty rate was approaching 30%. Salisbury has traditionally relied heavily on the manufacturing sector, particularly textiles and fabrics. In recent decades, however, manufacturing activity has declined significantly and continues to do so. Between 2010 and 2012, manufacturing jobs in Salisbury — as a percent of the workforce — shrank from 15.5% to 8.3%.

But the truth is that you don't have to travel far to see evidence of our economic demise for yourself.  All you have to do is to go down to the local shopping mall.  Sears has experienced sales declines for 27 quarters in a row, and at this point Sears is a dead man walking.  The following is from a recent article by Wolf Richter...

The market share of Sears – including K-Mart – has dropped to 2% in 2013 from 2.9% in 2005. Sales have declined for years. The company lost money in fiscal 2012 and 2013. Unless a miracle happens, and they don’t happen very often in retail, it will lose a ton in fiscal 2014, ending in January: for the first three quarters, it’s $1 billion in the hole.


Despite that glorious track record, and no discernible turnaround, the junk-rated company has had no trouble hoodwinking lenders into handing it a $1 billion loan that matures in 2018, to pay off an older loan that would have matured two years earlier.

And J.C. Penney is suffering a similar fate.  According to Richter, the company has lost a staggering 1.6 billion dollars over the course of the last year...

Then there’s J.C. Penney. Sales plunged 27% over the last three years. It lost over $1.6 billion over the last four quarters. It installed a revolving door for CEOs. It desperately needed to raise capital; it was bleeding cash, and its suppliers and landlords had already bitten their fingernails to the quick. So the latest new CEO, namely its former old CEO Myron Ullman, set out to extract more money from the system, borrowing $1.75 billion and raising $785 million in a stock sale at the end of September that became infamous the day he pulled it off.

So don't believe the hype.

The economy is getting worse, not better.

Quantitative easing did not "rescue the economy", but it sure has made our long-term problems a whole lot worse.

And this "tapering" is not a sign of better things to come.  Rather, it is a sign that the bubble of false prosperity that we have been enjoying for the past few years is beginning to end.

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LetThemEatRand's picture

9.  You have to watch a few bankers get wildly rich at your expense.

Al Huxley's picture

Yep, this is the big one.  The others are open to debate, but this one's a lock.

Mr Pink's picture

Stocks are going to go down?

Which stock market is this guy talkin about?

James_Cole's picture


The human race has survived quite a bit so far, I have full faith it will survive the demise of Sears. 

I like how on the one hand everyone is all 'this corporatocracy is bullshit and bad for everyone' and on the other 'oh shit! If our beloved overlords go out of business we're all gunna die!!'


Bad Attitude's picture

Dear Leader says the economy is improving. We should be thanking Dear Leader for raising the chocolate ration to 20 grams per week.

Forward (over the cliff)!

BKbroiler's picture

The human race has survived quite a bit so far, I have full faith it will survive the demise of Sears. 

nicely put.  let's do this already.

Tall Tom's picture

I have full faith that the Human Race will survive the demise of the United States Government. In fact that may be the best event that can happen to ensure the survival of civilization.


If you have such faith in the US Government, which I do not, then why need you have any objections to a Taper of QE to ZERO now? I have no objections to that whatsoever.


Both positions make sense.


It is QE that makes no sense, James Cole. It is just that our predictions for the end outcomes are so widely divergent.

SamAdams's picture

Ty, for your wisdom... But, end of ponzi is here.  Is why china owns all gold.  America stripped and left as planned. Traitors will remain as usa is isolated sea-wise.  Rest of you dumb fucks, sold your children to hell.  Think...


Pandorable's picture

The economic collapse of the US economy has been orchestrated by the global shadow elites as prerequisite to the NWO. If anyone has any ideas how to unify against this happening, let's hear them....

Wouldn't it be beautiful if everyone could (and did) withdraw everything from their bank and brokerage accounts at the same moment - to empower us and strand the system?

Someone has to dream...right?

Zero Point's picture

Yes, increasing the chocolate ration to 20 grams per week, up from 5 grams per day is double plus good leadership brother!

TheReplacement's picture

Sears is not a bank or a social media company.  Sears actually provides value.  Sears goes under while bankers get huge bonuses and twits are fookbacing while their stocks soar on no profits. 

It's not that we wail when a big corporation fails.  We wail that the ones that should fail do not.  It isn't a fair market.  It isn't a free market.  It's all about what the tptb want and we're all pawns.  If you're okay with that then go away.  This site is not for you.

zaphod's picture

What taper. So far they even haven't begun to taper, and even if they do it will probably only be for several months, oh and 10B/month taper is nothing compared to the $75B/month they are still printing.

dark pools of soros's picture

not much storage fees in stocks... what else is a billionaire to do with such low effort?  buy land on Mars?

merizobeach's picture

"What taper."

Exactly.  Would the smartest goldmanite in the room please stand up and tell us how actual flow has been affected?  From my observations of the Fed's own website, I haven't seen a single month this year where the flow was above $75bn.

It appears there just isn't enough MBS available to mop up each month, because those purchases have averaged under $30bn month since shortly after the start of the so-called $40bn/month program.

This "taper" is in name only: the flow doesn't change, so no thieves get their dicks stepped on, while the tax-serfs and world govs can listen and dance to the Fed's tune about responsible management of the economy.

One person not surprised is merizobeach, and it may be noted that since the first mention of the prospect of "tapering", I have consistently explained my expectation for this sort of fake-taper/same-flow.  After all, why should they counterfeit less when no one is really forcing them?  The other central banks of the world, being equally fucked, are happy enough to play along.

Papasmurf's picture

not much storage fees in stocks...

Do you know where stocks are stored?

Zero Point's picture

I reckon they're jawboning themselves a position to increase QE in some form or other.

HardlyZero's picture

Yes, a Fakir see how the markets will react.

Pavlov or Keynes would be proud.

But what about the other side of this grand pure fiat experiment ?

chubbyjjfong's picture

"And thanks to the Federal Reserve, the pace of money creation in this country has gone exponential in recent years"

Umm.. No it hasn't.  Yes the FED has created shit loads of money, however not enough to replace the dollars that the banks are not creating due to not loaning courtesy of ZIRP.  We are not experiencing massive money creation.  The opposite is actually more acurate.  The problem is, as we know, that the majority of the FED printed money is going straight to the stock market and not the economy.  Money velocity is slowing along with a strangled economy.  "Exponential".. don't think so..

chubbyjjfong's picture

Its just blatant wealth transfer, from the working class to the banksters, to the tune of 75 billion a month.  And no one even knows, nor gives a fuck, that its happening.  And it doesn't matter because as long as the money printing continues.. the stock market willl only go up.  Real estate bubbles will continue.  Luxury assets will continue to soar.  The only thing that will stop it is the loss of faith of the masses.. and that aint likely as they don't even want to know about it.  Its pure evil genius. 

LetThemEatRand's picture

I know and give two fucks.  So we've got that going for us.

Shocker's picture

While the economy continues to get hurt.

Job Situation:


fonestar's picture

It is unlikely a taper will affect me.  I am just the reflection of the virtualization of an abstraction of a character who was not cast in an unpopular sitcom.

prains's picture are not a hologram, in fact more like an embarassing strip o gram

Zero Point's picture

I've moved out of litecoin, back into btc, just so I can be happy when fonestar is happy.

Serenity Now's picture

Melrose Place is a really good show.  

nmewn's picture

All the looting of the public treasury that the law will allow.

Free Corzine!

And don't forget to pay your taxes, serfs.

ejmoosa's picture

1. They already were

2. They already were

3. They are well over do to.

4.  Has been since 1913

5.  Been again since 1913

6.  It did keep employment from falling.  My model with a correlation of .85, forecast 0 job growth for 2013 before QE3

7.  They have been since 1973.  We were too arrogant to realize it.

8.  The economy has been getting worse since before the last recession.  The arttificial recovery is going to be even more painful to withdraw from.  Government aid shows it has never really gotten better.

9.  Bankers have necks....

WillyGroper's picture

9. Trouble is they're too short.

acetinker's picture

Who down-voted that?  There's quite a few that deserve a good neck stretching, imo.

Shizzmoney's picture

I agree with all of these except for, "Stocks will go down".  Not yet; they are still printing and the taper revealed that the asset purchasing program of the Fed was actually buying $96b/mth, not $85b/mth. 

Today, a few economists on my twitter stream were having a debate on private and public surpluses and deficits and how they relate to recessions. One argued that since the govt deficit is "going down", corporate profits will follow suit. 

Well, for the first time since 1987 today, corporate profits made up 11% of GDP.

Read that again.

What that means is the US's economy dynamic is changing.  Paper pushing is the new credit creation (not savings).  Derivitives and financial products are the new manufacuring base.  Dividends and buybacks are the "backstop" to this failed market....which goes right into the pockets of those who hold corporate bonds as well as the board members of those corporations.

Unemployment doesn't matter (except esoterically; which is why they manipulate it).  Wage growth doesn't matter (and hell, you can suppress it and you won't have inflation while you print up cash for your Wall St friends!).   Economy mobility, and inequality, even doesn't the end, the stocks WILL go up, because the central planners said so.  Revenues and even spending.....doesn't matter!  Because it's a fucking banana republic!!!!1111

The only way this gets corrected is either a) some social event changes society or b) bonds crash (that's more likely, will start to happen around 2015).  Either way, DOW to 20K, despite all of the crappy indicators the author mentioned above.

Who needs sales when you have endless corporate cash to purchase back stocks (at ZIRP interest rates)?


ReactionToClosedMinds's picture

to your points .... fin svcs as a proportion to GDP is beyond its historical band by a wide margin in the USA (and I would bet Europe as well but I canot recall seeing that).     Finance is a functional subset of economic activity .... economic activity does not just happen to support financial services per se ..... so your 1987 observatrion is the same phenomenom.  I agree, best candidate I can come up with is the 30 year bull bond market reversal will send off its own energy waves as it transitions 

Clowns on Acid's picture

100% - As Tyler has commented for some time..."It's not the stock, its the flow".

AccreditedEYE's picture

Sorry, this post is absolute garbage. Why? Because everyone is expecting this. What does this mean? It's not going to happen. What else does it mean? That army of hedge funds is out there, waiting for you to drink this down, believe it and act accordingly. They will allow some time for you to put on some shorts, sell some longs and then they are going to crush you. Again. Harshly.

You who've sat out and not participated, I applaud you. You have bought and taken in gains, I applaud you. You who want to fight this thing and short, wake the hell up. They are getting ready to rob you for the Nth time.

unwashedmass's picture




















texas sandman's picture

My ears hurt after all that yelling....


Fuck Yellen (just beating the Christmas rush)


BTW, only 4 shoplifting days left before Christmas. 

Zero Point's picture

Dude. Did you seriously hold down the shift key for that?

Kudos for the rage post man.

max2205's picture

Robots.....dems will let us all die offf until a new balance is struck

Mr Pink's picture



9. Gold and Silver DOWN

Waterfallsparkles's picture

I think the Fed has been directly intervening in the Market.  Wenesday just proves it.  I do not know if they buy S&P futures (especially overnight) or they short the vix but it does influence the Market.

I know no one can prove it because we cannot audit the Fed to see what they really do.

Yet, I think Bernanke is like a Day Trader with huge amounts of Money at his disposal to influence the Market.  He must sit at his desk all day and when the market goes down 10 points buys S&P futures and shorts the vix.  I think he is an addict with more power than any Hedge Fund to make sure the Market goes the way he wants it to go.

grunk's picture

In other words, this isn't going to help me get babes?

Then put me down as a "No."

Al Huxley's picture

Buy FB, TWTR and HLF, heavily leveraged.  Wait 2 weeks.  Take the massive profits to the local nightspot and spend freely - so it should help, indirectly.

Wilcox1's picture

How could the run up have occured on so much volume?

haskelslocal's picture

Tell me 8 ways Taper is going to effect people.

I barely get to #2 and it's only "likely" to happen.


Article written by the BLS.  


disabledvet's picture

"this can happen, that can happen. hahaha! what's me gamble and gamble. hahahaha!" where is your commitment of traders report douchebaggus maximus? otherwise this is all "puke on a page" as they (used to) say at the New York Times. Better yet...does the Fed Chairman...out going or incoming...look at the COT before starting his day? That strikes me as an important piece of info that "an inquiring mind" should want to know. Not that that question ever gets asked at any of the press conferences of course.

10mm's picture


Blame Crash's picture

So what are the chances that they needed to taper just as what's-his-face was walking out the door? This was done so that he could claim that everything was just fine when he packed it in. It's all just more "Theater" from the same crew of bad actors.

I hope I'm wrong but my guess is that what's-her-face will have to reverse this decision and then raise it.

SamAdams's picture

Ty, for your wisdom... But, end of ponzi is here.  Is why china owns all gold.  America stripped and left as planned. Traitors will remain as usa is isolated sea-wise.  Rest of you dumb fucks, sold your children to hell.  Think...

TheRideNeverEnds's picture

Your Stocks Are Going To Go Down


hahahahahaha...  good one!