Bonds & Interest Rates

The Fed’s Taper is just Some Cosmetic Adjustments

Posted by Marc Faber via Marcfabernews.com

on Thursday, 19 December 2013 8:47

Screen Shot 2013-12-19 at 12.27.01 AM“The Fed will never end QE for good,” “They will continue because these programs, once they’re introduced, usually keep on going.””The economic recovery, or so-called recovery, by June of next year, will be in the fifth year of the recovery,” Faber said. “So at some stage the economy will weaken again, and at that point, the Fed will argue, ‘Well, we haven’t done enough, we have to do more.'””The Federal Reserve—all of them—could be sitting on a barrel of dynamite, and then pouring gasoline on top of it, and then light a cigar with matches, throw the match into the gasoline, and then not notice that there is any danger,” Faber said. “That is the state of mind of the professors at the Fed, who never worked a single [day] in business.” “They may do some cosmetic adjustments, but in my view, within a few years, the asset purchases will be substantially higher than they are today,” 

 Marc Faber told CNBC Yesterday 

The Federal Reserve is trimming its monthly bond purchases to $75 billion from $85 billion, taking the first step toward unwinding the unprecedented stimulus that Chairman Ben S. Bernanke put in place to help the economy recover from the worst recession since the 1930s.

“Reflecting cumulative progress and an improved outlook for the job market, the committee decided today to modestly reduce the monthly pace at which it is adding to the longer-term securities on its balance sheet,” Bernanke said at a press conference in Washington today after a meeting of the Federal Open Market Committee.

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Strong Explanation Why Fed Won’t Taper

Posted by Egon von Greyerz via King World News

on Wednesday, 18 December 2013 16:19

shapeimage 22Greyerz:  “Eric, there will be no tapering.  It’s impossible.  They can’t taper because the situation in the US is still very desperate.  Today, for example, we had the news from Zions Bankcorp, which is in Utah, that if they have to follow the Volcker Rule and value their debt at market value, not at maturity value, the bank will have serious balance sheet problems.

This is what I’ve been saying all along, if banks had to value their toxic debt at market value, the banking system would not survive.  The Fed and the rest of the central banks know this.  That means they will absolutely not stop tapering because the banking system would not stand.  It would not survive either in the US or in Europe.  This is why the Fed decision will definitely be no tapering.

The troubling point here is the central planners will want to push gold down to the US dollar lows because gold in all of the other currencies has already made lower lows than what we saw in late June.  I’m not sure they will succeed in pushing gold to new lows, but it is irrelevant because whether the rally starts at Christmas or the beginning of 2014, next year will be the most spectacular market for gold and silver because of what’s going to happen in the world economy.  

As we see the fall in the world economy in 2014, that will lead to massive money printing and QE from all of the central banks next year.  Gold and silver will be the major beneficiaries of this money printing and QE.  So 2014 will be a huge year for both the metals and the mining shares.”

IMPORTANT – KWN has more interviews:

The Frightening Reality Of Gold Disappearing From The West

Absolutely Shocking Developments In The War On Gold

Insolvent Fed Decision To Cause Massive Market Moves

This Is How Bizarre Things Have Become Going Into 2014

This May Create A Cascading Collapse & Crisis

(Reuters) – U.S. nonfarm productivity rose the most in nearly four years in the third quarter but a drop in unit labor costs underlined a lack of inflation pressure, bolstering arguments for the U.S. Federal Reserve to maintain its massive monetary stimulus.

Productivity rose at a 3.0 percent annual rate after increasing at a 1.8 percent pace in the second quarter, the Labor Department said on Monday, driven by a 4.7 percent rise in output.

The data revised up an earlier estimate and was slightly above the 2.8 percent increase analysts forecast in a Reuters poll. It was the largest rise since the fourth quarter of 2009.

Productivity, which measures hourly output per worker, was 0.3 percent higher compared to the same period last year.

Unit labor costs – a gauge of the labor-related cost for any given unit of output – fell at a 1.4 percent rate in the third quarter, roughly double the originally estimated fall, underscoring the lack of wage-related inflation pressures in the economy. Unit labor costs had risen at a 2.0 percent pace in the second quarter.

The Federal Reserve is likely to consider subdued inflation when it meets this week. Over the last year, inflation has been well below the U.S. central bank’s 2 percent target, which has led some analysts to expect it will be slow about winding down its bond-buying program.

Economists polled by Reuters had expected unit labor costs to fall at a 1.3 percent pace in the July-September quarter. Labor costs were up 2.1 percent from a year ago.

…more: 

Dollar gains ground before Fed decision; yen struggles

LONDON – The dollar gained against the yen and euro on Wednesday, helped by a rise in U.S. yields, as investors positioned for a Federal Reserve decision later in the day on whether it will start to reduce its monetary stimulus this month.

The Federal Reserve will decide on Wednesday whether the U.S. economy is finally resilient enough to withstand less policy support, or whether it is prudent to wait a bit longer.

With the world’s financial markets on edge, the U.S. central bank wraps up a two-day meeting with a highly anticipated policy announcement at 2 p.m. (1900 GMT), followed by Ben Bernanke’s last news conference as Fed chairman a half hour later.

Recent growth in jobs and retail sales, as well as a fresh budget deal in Congress, has convinced a growing number of economists the time is right for the Fed to trim its $85 billion in monthly bond purchases. The 15-month-old program is meant to put downward pressure on long-term borrowing costs in order to stimulate investment and hiring.

But many observers believe the central bank will wait until early in the new year, given persistently low inflation and the fact that the world’s largest economy has stumbled several times in its crawl out of the 2007-2009 recession.

“It is increasingly looking like a coin flip,” said Michael Feroli, JPMorgan’s chief U.S. economist.