Is Tapering a Mythical Concept?

The Fed and Ben Bernanke would like us to believe that the economy is just fine and that the Fed will be tapering its debt purchases starting “real soon now.” The stock market dropped hard and bonds fell out of bed on the talk. But, what if the Fed was simply “jawboning” the markets to slow the speculative fever? What if the Fed has no intention of tapering at all? It all adds up to the Fed putting one over on the markets in that case. We don't know if this is the real situation or not, but what would you do if you were the Fed and you saw the speculative bubbles in the bond and stock markets? You'd probably spin a story about tapering, wouldn't you? In reality the economy is in a barely-disguised recession and is being levitated by Fed printed money. If you were the Fed, would you understand that if tapering were to happen, the economy would collapse? Give the Fed credit where credit is due: they've paused the speculative bubbles in stocks and bonds rather than pricking them like a lot of central bankers would have done. The big question is how long the market will stay in pause mode here before either resuming their speculative excess, or collapsing as all good bubbles eventually end up doing?

Posted in: Wall Street Trading