Fed Taper Flashback 12-16-13

I’m no psychic but below were my thoughts two days before the Fed taper.

Bullion.Directory precious metals analysis 29 October, 2014
By Terry Kinder
Investor, Technical Analyst

December 16, 2013:

With sentiment so lopsided toward the view that the Fed will not taper or raise rates, I have begun to wonder if this view is as certain as commonly assumed.

Remember when the idea of a Fed taper was considered impossible? Image: Wikimedia

Long rates, especially, have crept up a significant amount this year. Have they crept up in anticipation of tapering, has the Fed lost control of the mid-to-long end of the curve, or are they allowing it to go up?

There seem to be a lot of factors that would point away from a taper or increased rates: 1) Mortgage / Loan market; 2) Large amount of government debt; 3) Weak economy, etc.

I also wonder if the Fed might reduce or eliminate the amount it pays on excess reserves held by the banks. Maybe the Fed tries to get some of the money sitting idle out into the economy while at the same time letting interest rates rise for everyone except those who needed cash for a very short period of time.

It would be a little bit like one foot on the brake and one on the gas.

None of this is to say that I expect any of the above to happen, but so many are betting on Fed policy either remaining the same, or changing slightly, that it makes me wonder if something “unexpected” could happen. Anyhow, how many times can the Fed “cry wolf” on tapering and not do it before there are no more suckers left to believe their story?

Source

January 10, 2014:

I wonder what the Fed will do as long as the unemployment numbers reported to the media look good.

In the end there is no telling what the Fed will do. Some very smart people say they will have to turn the QE spigot back on. Quite a few smart people said they would never, ever slow the pace ever.

I tend to think that when too many people are on one side of the boat, it’s time to move to the other.

Continued QE is suicidal. Continued tapering could be fatal too – or a near death experience.

I think the Fed is looking for the exit door on this. Whether or not it is too late to escape only time will tell.

Source

Question everything. Whenever the “experts” and “pundits” say something is impossible, start thinking how the thing they say is impossible could become possible.

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