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Visualizing Taper

June 5, 2013

All credit to Zero Hedge for visualizing what “taper’ might look like. Taper is in reference to what has gotten our world financial markets all in a tizzy; will the Fed cut back on their ongoing additions to their balance sheet? Zero notes that the consensus is that if the Fed happens to taper their spending (reduce the speed at which they are adding to their balance sheet, not reduce it), it will be around 25 percent. Hence, the growth of new money printing will go down from its current level of $85 billion per month to $65 billion per month. Here is what that would look like in a chart:

The red dotted line represents consensus taper.

taper chart

Pretty scary looking, huh? Justifies all the drama in the markets I guess! “Oh my, will the Fed taper?” Seriously, if our financial markets are this sensitive then we are in for a world of hurt. Or, might I suggest — again — maybe all this taper scare has to do with the real question about whether the Fed policy is the actual problem and not the fix. After tens of trillions of dollars of liquidity, both newly printed money via the Fed and ever-increasing debt via our federal government, the economy still is not close to being able to stand on its own two feet after six years of this experiment. Any wonder we are finally having some doubters?

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