The Fed failed to announce a Taper yesterday of any kind.
It is positively outrageous, but it does inform us of many things.
First and foremost, the Fed has made it clear that it cannot be hawkish is any way. We had just two months of hinting at tapering QE from the Fed (Bernanke was back talking up how accommodating he’d be by July).
So for all the talk of taper and shifting to a more hawkish tone, the Fed’s actions speak louder than words: the Fed is totally and completely incapable of being hawkish at this time.
Secondly, the Fed knows that the US economy is a total disaster. If tapering even $10-15 billion per month from $85 billion month QE programs would damage the economy, then we’re all up you know what creek without a paddle.
Put it this way… here we are, five years after 2008, and the Fed is stating point blank that the economy would absolutely collapse if it spent any less than $85 billion per month. This admission has proven just how long ago we crossed the Rubicon. We’re already in the End Game. Period.
Finally, the Fed has proven that it has absolutely no exit strategy. The Fed is going to print money and buy bonds until the entire financial system collapses. Any time stocks fall it will try to rescue the markets. And it is going to do this ad infinitum because it has no clue what else to do.
In plain terms, the Fed has proven beyond even a hint of a doubt that it is simply flying by the seat of its pants, with no clear game plan or eventual outcome in mind. The Fed is simply going to keep doing what it’s done for five years until something breaks.
That something will be the entire financial system. We will have a crisis that is substantially worse than 2008. It is coming. In fact it is now coming much sooner than it would have had the Fed announced a taper yesterday.
In the meantime, inflation is soaring. The Fed continues to lie about CPI and inflation but the reality is that the cost of everything is going up. I’m sure you’ve noticed prices have begun rising already. This is only going to be getting worse going forward. Which is why now is the time to be preparing ourselves and our portfolios for this. Inflation can take its time to arrive. But once it does… things move very very quickly.
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