Since the beginning of the year the Fed has been talking about cutting back on its quantitative easing (“QE”) program that has been in effect for nearly five years. That talk has been increasing in recent months. QE involves creating money out of thin air in order to purchase US Treasuries and Mortgage Backed Securities (MBS’s) – securities for which there is limited market demand and the Fed is the primary buyer.
Next Fed Trick-“tapering” -Making Dollars Created Out of Thin Air, Vanish into Thin Air
Since the beginning of the year the Fed has been talking about ending their QE adventure or at least to start “tapering” their $85 billion a month of purchases of US Treasuries and MBS’s. The Fed needs to temper its purchases with tapering talk lest investors think that QE is forever. Such a thought would undermine confidence in a dollar that could be printed in infinite quantities forever. So the Fed will continue talk tapering while continue to prime the pump with QE. This is an effective strategy as the Fed knows that the markets pay attention as much to what they say as to what they do.
In a recent interview Michael Pento of Pento Portfolio Strategies gave an extensive analysis of the bind the Fed is in. It’s definitely worth a listen.
Please visit the Smaulgld Store for a larger selection of recommended Kindles, books, music, movies and other items.
Or you can support Smaulgld.com by making all your Amazon purchases through the search widget below and by ordering your gold and silver by clicking on the JM bullion ads on the site:
DISCLOSURE: Smaulgld provides the content on this site free of charge. If you purchase items though the links on this site, Smaulgld LLC. will be paid a commission. The prices charged are the same as they would be if you were to visit the sites directly. Please do your own research regarding the suitability of making purchases from the merchants featured on this site.
The content provided here is for informational purposes only. Making investment decisions based on information published by Smaulgld (SG), or any Internet site, is not a good idea. Accordingly, users agree to hold SG, its owner and affiliates, harmless for all information presented on the site. SG presents no warranties. SG is not responsible for any loss of data, financial loss, interruption in services, claims of libel, damages or loss from the use or inability to access SG, any linked content, or the reliance on any information on the site.
The information contained herein does not constitute investment advice and may be subject to correction, completion and amendment without notice. SG assumes no duty to make any such corrections or updates. As with all investments, there are associated risks and you could lose money investing. Prior to making any investment, a prospective investor should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment. SG disclaims any and all liability relating to any investor reliance on the accuracy of the information contained herein or relating to any omissions or errors and as such disclaims any and all losses that may result.