Septaper Will Open Floodgates

The flood myth is common in many cultures and civilizations around the world, in the belief that some greater deity will destroy the Earth for the wrong-doing that has been done and a new order will be created. Is that what we’re waiting for to get a new order rushed in and the old mistakes out the door as quick as you can say ‘Jack Robinson’ (apparently Jack Robinson was a ‘volatile gentleman’ of the 19th century; rather fitting in the circumstances)? I guess the flooding will start if Septaper goes through and Ben Bernanke stops the printing presses rolling then.

There are some that believe that the tapering threats will have no effect on the market and there are even some that believe that the market will actually shoot up as soon as the real date is announced. We hear of people that believe that ‘the market has already factored in the tapering’ and nothing will happen. It will all be a silly anti-climax with Bernanke, apparently.

But, we all know that’s impossible really and no sense of self-delusionary positive thinking will stop the markets plummeting the very minute that the tapering-date is announced. Get ready for the flood-gates to be opened and the rain to start pouring. That Great Flood is on its way and if we are lucky it might just wash away some of the people that are responsible for the Federal Reserve printing press being put into action.

The Federal Reserve officials have stated that they are “broadly comfortable” with the decision to begin tapering. But, they are largely the only ones that are comfortable at the moment. Yesterday the Dow Jones Industrial Average ended down 0.7% at 14, 897.55 (-105.44 points) when tapering was mentioned again. Stocks immediately fell after the release of the minutes of the Federal Reserve. However, they did recover quickly, but fell again later on in the day. The DJIA closed under 15, 000 and that’s the first time since the start of July. It has been the sixth-session where the DJIA is down. Today it stands at 14, 947.09 (+49.54 points, up 0.33%). We shall see what happens at the end of the day.

Whatever happens, the Federal Reserve is the ultimate one that needs to stand trial. Although, it’s debatable if that would serve any purpose. We stand by and watch Bradley Manning sent down for 35 years  after having transmitted 250, 000 diplomatic cables and 500, 000 military reports to Wikileaks but we do nothing for the $85 billion that has been rolling off the printing press of the Federal Reserve. Oh! It’s only money and we can print more of that anyway if we ever need it.

Septaper Consequences

The reason why the markets will go down is because the Federal Reserve has continually stepped in every time. That’s why we are at Quantitative Easing 4? I wonder just how far Ben Bernanke can count until he leaves the Fed?

Quantitative Easing has done nothing more than displace the problem of the financial crisis from the level of the banks to the sovereign-debt level and made it the problem of the national debt today thanks to the Federal Reserve’s decisions. If (or when?) the market were to collapse in the future, it would not be the Federal Reserve that would be able to get them out of the mess, since the Fed is also in the same predicament itself today, owning roughly a third of the ten-year market. If the Federal Reserve announces tapering, the market will just dump and run. Foreign investors have already started dumping.

  • June saw Japan and China off-load $40.8 billion in June as Bernanke announced the tapering scheme.
  • All other foreign dumping could be valued at about $26.1 billion in June.
  • That was the highest sell-off since August 2007.
  • China cut its holdings to $1.2758 trillion.
  • Japan reduced its Treasury holdings to $1.0834 trillion.
  • But, any adjustment by China and Japan for fear of tapering could be nothing much more than a drop in the Ocean. They both have so much debt from the USA that they would not be able to do anything substantial except watch as Treasury yields rise and prices plummet.
  • Japan stated that tapering had little to do with the sell-off for them. They needed to off-load the Treasury bills to protect their currency against the Dollar as did many other countries.
  • Foreign Central Banks’ holdings of US Securities fell in the week ending August 14th 2013 to $2.7 trillion (from $3.3 trillion) in one week.
  • Just before Bernanke made the announcement suggesting tapering at some point, foreign investors had bought $11.3 billion in Treasuries (May 2013).

Selling is now the order of the day. Who, in their right mind wouldn’t do the same? The Federal Reserve will be left with losses that are so high it will wipe it off the face of the US.

Farewell Fed, bye Bernanke.

Bernanke Septapering?

Bernanke Septapering?

Impossible to Exit

It is literally impossible to exit Quantitative Easing. We are stuck on a treadmill and condemned to run until we are exhausted with this. So, the ultimate answer is that it will collapse whatever is decided. So, maybe the Federal Reserve is just perusing over that idea and thinking that it’s best to cut its losses as soon as possible. Anyhow, if it’s done now, at least the Obama administration will be able to avert the public eye from sending in the snipers and bumping off Snowden. The markets will be sent into such disarray, he will have free rein to shoot at will.

  • In 1985, the money that was in circulation in the USA stood at roughly $200 billion.
  • Today, it is $1.2 trillion.
  • Currency in circulation has increased by 6 times.
  • However, Gross Domestic Product has not increased by that much at all.
  • It was 4 times less in 1985 ($4 trillion and today’s figure of $16 trillion).

Some analysts say that the Federal Reserve could introduce Quantitative Easing again as early as the start of 2014 since they predict that the Dollar will rise immediately on the start of tapering. It has been suggested that the Dollar could increase by as much as 20% against the Yen for example.

  • Today the Dollar was up against the Yen at 10.47 ET by 1.09% (+1.06 to 98.74).
  • This is over the peak that was seen on August 15th 2013 (98.66 Yen).
  • The Euro fell also today against the Dollar (-0.1% to $1.3338).
  • The Dollar has risen today across the board with the Federal Reserve minutes that suggest that it will be Septaper.

The Quantitative Easing practiced by the Federal reserve did nothing more than provide money to private banks that quickly invested that money in a stock market that soon became over-inflated after having gorged itself like a pig on heat on the scraps that were tossed to it. The people didn’t get any of that money. So, the only alternative is now for that market to collapse. It’s time for this little piggy to get it’s trotters off to market and we know what happens to pigs that go to market, don’t we? It’s Catch-22 for the Federal Reserve today. If Septaper happens, Bernanke will only have one thing to reply: “I’ll be back”. I think a massacre ensued straight after with Terminator.

Septaper and the market will collapse. Don’t taper and the market will still collapse when the Federal Reserve pops its clogs. Who’s going to be sending flowers?  
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1 Comment

  • tom kauser

    Reply Reply August 30, 2013

    And short rates are the SAME? Does the bonds take stocks or stocks take bonds. Or does debt take both? So when are short rates going to soar? A selloff in bonds which does not affect bills is just a selloff! What you think cant happen fast enough to cause what you wish for to happen. The Fed has to become wreckless with short rates and SIR that ain't happening. Your piece needs to factor in competition along yield curve. There will be a back Patting moment and that is the generational buy. COLLAPSE when no one knows what inflation really MEANS not going to happen. Screw you SUMMERS hawks? Just keep your mortgage current or we are all toast? The Fed is paying interest on dep. And buying credit? Sounds like income trap?

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