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Is the Fed Bluffing About Tapering QE?

“In the light of these uncertainties the committee decided to await for more evidence that the recovery’s progress will be sustained before adjusting the pace of asset purchases” Ben Shalom Bernanke, Chairman of the Federal Reserve

Thus spake Mr. Bernanke rationalizing why the taper of quantitative easing (QE) was off.

Reasons Given For Not Tapering:

We Need More Data to Confirm the Recovery is Progressing

The Fed is still trying to hold out the pretense that QE has been a success in bringing about a “recovery”. As we have pointed out there really has never been a recovery other than one as measured in rising house prices and a roaring stock market.

The Fed claims it needs to wait to see more evidence of a non existent recovery before scaling back its buying of $85 billion a month of U.S. Treasuries and mortgage backed securities (MBS’s). This is as dramatic of an admission as the one that Mr. Bernanke made back in June when he said the economy “the economy is weak, inflation rates are low, if we were to tighten policy, the economy would tank”.

Here Mr.Bernanke is again, three months later, having spent yet another $255 billion, saying the economy is STILL weak and needs the $85 billion a month support of QE. This should be a slap in the face to all those recovery addicts who have been touting economic recovery for the past few years. If the economy is in a recovery why does the Fed need to continue to print/spend over a trillion dollars a year to support it?


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The one Fed board member who voted FOR tapering

actually thinks the economy is getting better

and worries about Fed credibility

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Yes and no.

"QE" = monetization.

No nation that has ever monetized has ever been able to roll back monetization - EVER - in history.

So, having been formally been trained and educated in economics, I'd say that they probably have the INTENTION to deleverage and "taper" QE. They may even make several limited attempts as part of a plan to do it.

However, they will simply not be able to. Monetization is the last step prior to hyperinflation prior to collapse. Hence, they will find that their best laid plans will never be able to be realized.

We're stuck with QE at some level or another forever. There is no way out. Plan accordingly.

what you wrote is what

few understand such is the confidence in the Fed as an institution

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QE will never stop, as customers of Treasuries grow scarcer

QE will never stop, as customers of Treasuries are growing scarcer, especially foreign customers.

The interest rate on the bonds has doubled since QE3 began, which is a harrowing sign. As the interest rate rises, QE monthly purchases of treasuries will rise as well, to ensure interest payments are not wasted on foreign holders.

There is one silver lining in this dark cloud: as Ron Paul stated, the Treasury can call in any U.S. assets the Fed is holding. Thus, once a significant holding is attained, it is a matter of accounting -- shifting numbers from the red column to the black. And voila! Suddenly the U.S. debt is reduced by trillions.

There is another silver lining: All the $85 billion per month the Fed is paying out for treasuries and mortgages is being ploughed into the stock market by the sellers -- they certainly AREN'T buying new bonds. This makes for a big stock market bubble. WHEN it pops, all of that fake money pops with it. Its gone. Those reserves that came out of thin air return to the aether.

The Fed is betting that its clients will continue to plough its fiat into the stock market EVEN AFTER the bubble pops, in order to buy up the bargains, and restore value to the market! (No expectations of all this funny money going into commodities or consumer goods, of course! All QE to the stock markets, no matter what!)

So, there is no stopping this MMT masterpiece. By this time next year, the Fed will be buying 170 billion a month, fully funding the U.S. deficit for the rest of its existence.

As to whether the dollar collapses as a reserve global currency due to this appalling accounting trickery is another thing.

"Cowards & idiots can come along for the ride but they gotta sit in the back seat!"

Great points!

I hinted that the US could not ever pay back the fed in the original post but did not suggest that they wont rather that the fed wil ljust endlessly rollover the debt to keep the ponzi scheme going until total debasement takes place

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Another reason not to taper- the precious housing recovery

is fading
Pending home sales dropped for the third straight month

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the debt ceiling debate/debacle

will give the fed cover not to taper again in October

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