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"Why would they rush to taper now," says UBS' Drew Matus (also formerly a Fed economist), noting...

"Why would they rush to taper now," says UBS' Drew Matus (also formerly a Fed economist), noting unemployment is nowhere near low enough and inflation is at a half-century low. A Bloomberg survey of economists has the FOMC waiting until its late-October meeting before commencing the taper and slashing purchases to $65B/month from $85B.
Comments (5)
  • Yorick
    , contributor
    Comments (597) | Send Message
     
    Because the Fed is not really affecting Main St ie. unemployment and the official inflation number is so cooked that they know real inflation is spiking.
    19 Jun 2013, 07:54 AM Reply Like
  • bbro
    , contributor
    Comments (10605) | Send Message
     
    Gross Private Domestic Investment as a % of GDP is 13.4%...no recession has started in the last 65 years unless this was at least above 16%...the last 3 recessions saw this number go well above 17% before a recession started
    19 Jun 2013, 07:58 AM Reply Like
  • Joe2922
    , contributor
    Comments (436) | Send Message
     
    They won't "rush to taper now" but likely will reduce soon. Inflation is rigged to make it low, whenever it rises, they change the calculation, which is well-documented and known.
    Less treasuries will be available and Fed doesn't want to dominate that market as it has by leading.
    Less mbs are available and tbtf banks capital is adequate, so need to prop them up is far less now than 3 yrs. ago.
    Does anyone believe $85b/month will continue into 2014? I don't.
    Govt. stats are what they are and need to get the details. Fed has no ability to control the economy -- only monetary policy - and even the Fed is aware of the great risks to current policies.
    Employment is weak, participation rate is weak, but never ignore the underground economy, and huge wealth transfers via inheritances. U.S. stock market is forming the mother of all tops now, but whether it transforms into the inevitable next bear market and recession this year won't be known until later:
    http://bit.ly/WpVqYk
    19 Jun 2013, 07:59 AM Reply Like
  • Ted Bear
    , contributor
    Comments (653) | Send Message
     
    The Fed would give part of their anatomy to get a whiff of inflation. Who benefits from Inflation? Those with the most debt.

     

    The TBTF Banks are a heart beat away from having their equity capital wiped out. Changing the rules to allow them to throw everthing but the kitchen sink into their capital calculation hasn't changed the fact that one major event will destroy their 'real' capital.

     

    So, how can QE end? It has been the ultimate 'kick the can down the road' strategy. Does it end because it no longer does anything? Are we bumbling along at a contrived 2% because of QE, and without it we whither? Do we faze it out and pretend everything is fine? Or does the market sniff that out pretty quickly? Or does the FED announce a formal schedule of retractment, we get a big market bump, a quick slowing of the economy, and then we see if either can find their legs?

     

    Who knows? But i suggest that it won't look like we all think it might...as in, QE will fade, but some 'new' contraption will come along to take up the slack. This could go on for decades before final jeoprady.
    19 Jun 2013, 08:12 AM Reply Like
  • Joe2922
    , contributor
    Comments (436) | Send Message
     
    The U. S. Govt. is the main beneficiary of low rates on its new debt.
    Just about every scholar believes 10 yr rates will rise inevitably no matter what Fed does or stops doing. El Erian thinks they'll stay in a range capped by 2.5% yield.
    The Congress has proven itself unable to remedy long term fiscal balance so far, and with so much govt. debt, 3% yield on 10 yr would really put a dent in the budget.
    So Fed/Ben has bailed out the stupid crooked big banks and the govt. as well. He put his finger in the dyke but he can't prop it all up permanently which is why he continually begs for DC to do what's necessary.
    19 Jun 2013, 08:22 AM Reply Like
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