Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20
China Recovered in Q2. Will the Red Dragon Sink Gold? - 23rd Jul 20
UK Covid19 MOT 6 Month Extensions Still Working Late July 2020? - 23rd Jul 20
How Did the Takeaway Apps Stocks Perform During the Lockdown? - 23rd Jul 20
US Stock Market Stalls Near A Double Peak - 23rd Jul 20
Parking at Lands End Car Park Cornwall - UK Holidays 2020 - 23rd Jul 20
Translating the Gold Index Signal into Gold Target - 23rd Jul 20
Weakness in commodity prices suggests a slowing economy - 23rd Jul 20
This Stock Market Stinks - But Not Why You May Think - 22nd Jul 20
Protracted G7 Economic Contraction – or Multiyear Global Depression - 22nd Jul 20
Gold and Oil: Be Aware of the "Spike" - 22nd Jul 20
US Online Casino Demographics: Who Plays Online For Money? - 22nd Jul 20
Machine Intelligence Quantum AI Stocks Mega-Trend Forecast 2020 to 2035! - 21st Jul 20
How to benefit from the big US Infrastructure push - 21st Jul 20
Gold and gold mining stocks are entering a strong seasonal phase - 21st Jul 20
Silver Eyes Key Breakout Levels as Inflation Heats Up - 21st Jul 20
Gold During Coronavirus Recession and Beyond - 21st Jul 20
US Election 2020: ‘A Major Bear Market of Political Decency’ - 21st Jul 20
Summertime Sizzle for Gold and Silver - 21st Jul 20
Overclockers UK Custom Built PC Review - Delivery and Unboxing (3) - 21st Jul 20
Will Coronavirus Vaccines Become a Bridge to Nowhere? - 20th Jul 20
Stock Market Time for Caution?  - 20th Jul 20
ClickTrades Review - The Importance of Dynamic Analysis and Educational Tools in Online Trading - 20th Jul 20
US Housing Market Collapse Second Phase Pending - 20th Jul 20
Capitalising on the AI Mega-trend - 20th Jul 20
Getting Started with Machine Learning - 20th Jul 20
Why Moores Law is NOT Dead! - 20th Jul 20
Help the Economy by Going Outside - 19th Jul 20
Stock Market Fantasy Finance: Follow the Money - 19th Jul 20
Did the Stock Market Bubble Just Pop? - 19th Jul 20
Quick Souring of the S&P 500 Stock Market Mood - 19th Jul 20
The Six-Year Jobs Recession - 19th Jul 20
Silver Demand Exploding! - 18th Jul 20
Tesco Scraps Covid Safe One Way Arrow Supermarket Shopping System - 18th Jul 20
The Rise of Online Pawnbroking - 17th Jul 20
Gold Rallies Together With U.S. Covid-19 Cases - 17th Jul 20
Gold & Silver Measured Moves - 17th Jul 20
The Bizarre Mathematics Of How Negative Interest Rates Create Stratospheric Profits - 17th Jul 20
From a Stocks Bull Market Far, Far Away, Virus Doomsday Scenerio! - 16th Jul 20
Fiscal Cliffs and the Self-destructing Treasury - 16th Jul 20
Dow Stock Market Crash Watch - Update - 16th Jul 20
Gold & Silver Gaining on US Dollar Weakness - 16th Jul 20
How to Find the Best Stocks to Invest In - 16th Jul 20
Overclockers UK Custom Build PC Review - 2. System Build Changes Communications - 16th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

What a QE Taper Means for Markets and the Next Fed Chair

Stock-Markets / Quantitative Easing Aug 08, 2013 - 11:14 AM GMT

By: Money_Morning

Stock-Markets

Garrett Baldwin writes: On Tuesday, Federal Reserve Bank of Chicago President Charles Evans announced that he wouldn't be surprised if the central bank begins to taper its $85 billion monthly bond-buying program in September.

Evans is the third official this week to signal a QE taper. Richard Fisher, president of the Dallas Fed, and Dennis Lockhart, president of the Atlanta Fed, parroted Evans' sentiment.


While Fisher indicated he would prefer to cut back bond purchases in August, Lockhart stated a preference for a September QE taper, although the Fed could wait longer if economic growth and unemployment trends reverse.

But it is Evans' announcement that is the most important. Evans is a member of the activist wing of the Federal Reserve. These members strongly support unconventional monetary policies such as bond buying, which are designed to reduce borrowing costs to spur aggregate demand and hiring across the country.

His views reflect those of the majority of members of the FOMC, the Fed's monetary policy committee.

"We are quite likely to reduce the flow of purchases rate starting later this year - I couldn't tell you exactly which month that will be - and it's likely to wind down over time in a couple or few stages," Evans told reporters.

Despite the signs the Fed will begin a QE taper, Evans said the central bank will continue to maintain low interest rates until unemployment falls below 6.5%, a feat that likely will not happen until mid-2015.

In the meantime, the era of cheap money will extend until GDP growth reaches 3%, a figure Americans would welcome given the stagnate economy of the last two years.

Wiggle Room in Baked Numbers

Even if unemployment falls, the data behind the jobless figures does not paint the picture of an economy improving its health.

The 7.4% unemployment figure has been driven by two hidden points of data that most Americans ignore: the rise of part-time employment and the outright departure of millions of Americans from the U.S. labor force.

According to Keith Hall, a senior researcher at George Mason University's Mercatus Center, 97% all job growth over the last six months has been driven by part-time employment.

And as part-time work has exploded, millions of frustrated Americans have given up on searching for work and therefore they are no longer included in the U.S. labor statistics. The worker participation rate fell again last month, to 63.4 percent in June. Had the labor force been the same size as it was in June 2009, when the recovery was announced, the official unemployment rate would be above 10%.

In addition, the Fed's suggestion of a QE taper has led to jitters across the market.

In June, Fed Chairman Ben Bernanke said in a speech that the bank could begin to taper its program "later this year" should the economy meet the Fed's expectations (1.7% GDP growth isn't setting the bar very high). As a result, the market dipped.

With Evans repeating QE taper talk, the markets again fell, and consumer goods stocks staggered.

It seems that the market will react to any reduction in free money from the Fed.

Would a QE Taper Signal a Summers Chairmanship?

It appears that one of the engineers of the financial crisis train wreck will now likely run the railroad. The announcement of potential reductions in the Fed's bond-buying program favors the chairmanship of Larry Summers over rival candidate Janet Yellen.

Despite a stunning resume of failure and reputation for championing the very anti-regulatory policies that fueled the financial crisis, Summers has been provided cover by the president, his former boss when Summers served as the president's chief economic advisor.

"He was the Rock of Gibraltar on trying to work through policies to turn the economy around," President Obama recently told House Democrats. "I'm not going to stand idly by and let his name be disparaged and his reputation trashed because people have a political agenda about who should or should not be the chairman of the Federal Reserve."

Summers has been somewhat skeptical of the bond-purchasing program, an important signal, given that the next Fed chairman will likely have to lead its exit. Of the two frontrunners, Summers would likely taper the Fed's quantitative easing more quickly than Yellen.

Nonetheless, Summers has argued for more direct stimulus, and that the government should use historically low borrowing costs to pay for more federal spending now, particularly on infrastructure, to boost growth.

Yellen, the current vice chair of the Fed, and co-favorite to replace Bernanke, remains the best forecaster in the building, but lacks the political influence to push her candidacy. She is also viewed as a dove, and has adamantly defended the bond-purchasing programs in the past.

One must question how both Summers and Yellen could coexist, if at all. Cumberland Advisors' David Kotok commented on Tuesday that the Summers candidacy could signal Yellen's departure in 2014. In addition to Yellen, the board could also lose up to four additional members, given the anticipated departures of Sarah Bloom Raskin, Elizabeth Duke, and possibly Jeremy Powell.

Bernanke does not plan to leave until his term ends in 2014. However, QE taper signals like those this week from Fed policymakers could provide a hint of who will take his job, and more importantly, how the markets will react in the next few months.

Larry Summers really, really wants to be the next Fed chairman. And it seems that President Obama is willing to grant his desire. We show you here why Summers is dangerous and a sop to the Big Banks.

Source :http://moneymorning.com/2013/08/07/what-a-qe-taper-means-for-markets-and-the-next-fed-chair/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules