Tapering Is Tightening

Tyler Durden's picture


Still unconvinced? Even Jim Bullard told investors that 'tapering' is tightening  - but don't take his (or our) word for it... the following chart says it all...


It's the flow, stupid...


h/t @Not_Jim_Cramer

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Sat, 04/12/2014 - 14:22 | 4651493 barliman
barliman's picture


Tapering increases the opacity of the HFT "skim" as a negative effect on markets. FLOW must be large enough to hide the market drag created by the "skim" because it is the EXACT same thing as interest rate increase - it reduces the overall return.

As the FLOW decreases, the total available to the "skim" shrinks and the HFT algo's are going to have to increase the "skim interest rate" to maintain their returns.

Anyone unclear on how THAT is going to effect the markets?

Sat, 04/12/2014 - 16:32 | 4651821 bagehot99
bagehot99's picture

The skim can only work like every other Ponzi system, if the overall amount of money in the scheme increases without interruption.

Once the overall amount of money in the scheme stabilizes, the skim starts eating into what's left, which drives more money out of the scheme, until it collapses.

This is how every Ponzi scheme in the history of mankind has ended. This will be no different.


Sun, 04/13/2014 - 23:56 | 4655788 MeelionDollerBogus
MeelionDollerBogus's picture

Is let me guess: involve moose & squirrel?

Sat, 04/12/2014 - 14:22 | 4651494 dracos_ghost
dracos_ghost's picture

The "taper" number is just  headline BS. Even though they are "tapering", they can monkey with the money multipliers to keep tightening at bay. IOW, $85B/mo might have led to $1T in notional whereas $55B/mo could lead to $1.5T notional if they allow the multiplier to drift to policy targets.

Sat, 04/12/2014 - 14:26 | 4651502 Fuh Querada
Fuh Querada's picture

The rate of change of the rate of change is decreasing slightly.
At least that was what we were told in calculus classes.

Sun, 04/13/2014 - 04:29 | 4653390 DavidC
DavidC's picture

Fuh Querada,
Yes, I laughed when I read the caption of the chart - 'Federal Reserve Asset GROWTH vs. S&P 500'! What a joke!


Sat, 04/12/2014 - 14:30 | 4651505 rtalcott
rtalcott's picture


Finance officials confident of global growth


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Apr 12, 9:19 AM (ET)



(AP) International Monetary Fund (IMF) Managing Director Christine Lagarde speaks with Turkish Deputy...
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WASHINGTON (AP) - Finance officials from the world's major economies believe an ambitious goal to boost global growth by $2 trillion in the next five years is within reach despite a variety of threats, including rising tensions over Russia's actions in Ukraine.

In a statement Friday, finance ministers and central bankers from the Group of 20 wealthy and developing nations avoided substantial differences in areas such as interest rate policies and tougher penalties against Russia.

Their talks were to resume Saturday with meetings of the policymaking committees of the International Monetary Fund and the World Bank.

In the G-20's statement, officials pledged to keep working on economic reforms that could increase growth by 2 percent over the next five years. But they acknowledged the political difficulty in the changes needed to reach that goal.

Sat, 04/12/2014 - 14:38 | 4651516 Fuh Querada
Fuh Querada's picture

not so long ago a BIS paper was published recommending the issue of $100 trillion of new debt to "increase worldwide economic growth"

Sat, 04/12/2014 - 14:37 | 4651514 Ban KKiller
Ban KKiller's picture

What is FED doing with all their real estate "assets", cmbs, etc.? Are they the largest owner of real estate? To whom do they sell these assets to? Free market I suppose.

Audit the FED. 

Sat, 04/12/2014 - 14:39 | 4651520 Fuh Querada
Fuh Querada's picture

they have a few fleapit motels on their books ....

Sun, 04/13/2014 - 11:15 | 4653963 Comte d'herblay
Comte d'herblay's picture

Auditing the FED would be like performing an 'autopsy' on a Live Tiger.

Sat, 04/12/2014 - 14:47 | 4651539 seek
seek's picture

Interesting -- if you look at the chart closely, in the beginning you can see the Fed is leading the market, as you'd expect -- then over time the lead gets smaller and smaller until the Fed and market are basically concurrent.

Sat, 04/12/2014 - 15:32 | 4651624 Unknown Poster
Unknown Poster's picture

I see the SP500 leading and attribute it to the fed announcing an upcoming printfest before it starts.

Sat, 04/12/2014 - 14:51 | 4651545 intric8
intric8's picture

Aherm.. excuse me tyler, but doesnt this chart indicate that the fed gets its asset purchase buying spree signal once it goes negative? Whats this chart normalized to? Seems to me like when assets reach the -2% range, its like "hells bells boys, we gotta buy some shit up!" Wow. This neochartalism stuff is a lot easier to understand than i thought! If the fed res geniuses engage in seemingly complex monetary policy based on one freaking indicator on a chart like its a friggin RSI or 50 dma, I mean if its as simple as that, we give those bastards way more credit as financial engineers than they deserve. I know it aint that simple, but it sure looks that simple. Notice how the spoos take off prior to asset purchases kicking in? I bet that coincides with the fed 'announcement' of asset purchases. What a joke of a market!

Sat, 04/12/2014 - 14:53 | 4651551 max2205
max2205's picture

Looks rigged to me

Sat, 04/12/2014 - 14:59 | 4651557 buzzsaw99
buzzsaw99's picture

they have been doing stealth qe for a long time. headline qe is nothing. if they ever stopped doing stealth qe THAT would be teotwawki.

Sat, 04/12/2014 - 15:40 | 4651648 Peter Pan
Peter Pan's picture

I always have issues with these graphs when the left and right axes do not align. I stand to be corrected but can someone enlighten me how they determine the relative positioning of the figures on each axis?

Sun, 04/13/2014 - 23:52 | 4655782 MeelionDollerBogus
MeelionDollerBogus's picture

They're not supposed to align, that's why you make a scatterplot with them not aligned & you get an equation and R2 value to determine how accurate that is.

e.g. http://flic.kr/p/ikyjpz or

http://flic.kr/p/kpoT2k  regression (power) trend R^2 = 0.98 USLV = silver^ 3.92 / 2364.56

Sat, 04/12/2014 - 17:10 | 4651973 polo007
polo007's picture


All Federal Reserve Banks - Total Assets, Eliminations from Consolidation

$4.4 trillion

Sat, 04/12/2014 - 17:33 | 4652038 RaiZH
RaiZH's picture

Why did I just turn my laptop upside down? 



Sat, 04/12/2014 - 18:28 | 4652177 RaceToTheBottom
RaceToTheBottom's picture

They got an app for that.....

Sat, 04/12/2014 - 20:56 | 4652708 yogibear
yogibear's picture

It's Fed theater.

They have Bullard come out and act like the boogieman. Later they have Yellen, William Dudley and Charles Evans act like the doves to try and control the markets.

All Talk. The Fed is still QEing about $65 billion/month. Maybe even more. The Fed has become a crooked organization of smoke and mirrors.

Sun, 04/13/2014 - 03:21 | 4653357 Colonel Klink
Colonel Klink's picture

Has become?  It's ALWAYS BEEN!

Sun, 04/13/2014 - 20:38 | 4655349 Hohum
Hohum's picture

You could also compare Federal Reserve Liability Growth v S & P 500 because both sides of the balance sheet rise.  And it's the "credit" side that drives asset inflation.

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