Tapering decision

On September 18, 2013 by Phil Champagne

In the late 1990s, when I didn’t understand quite well how this financial system actually worked, I found it very strange that the market would be so dependent on the action and decision of one man (at that time Fed Chairman Greenspan) or a few men (Fed committee). Indeed it is strange, but that’s what we have to deal with in this crazy world. This week, the Fed will announce if they will taper or not, and what future expectation. I’ve said before I don’t expect them to taper, but if they ever do, brace for impact.

There is another 2008 crash style coming, except the next one will be much bigger and quite different in nature, but this means a collapsing stock market for sure. According to many economists, they expect a mild tapering of $10 billion in reduction of the QE. Currently at $85 billion per month (that’s $1.02 trillion of printed dollars per year), a reduction of $10 billion would mean $120 billion less per year. If they actually do this, this next crash will be sooner rather than later.

Remember those “green shoots”? Expect rising interest rate as Monsanto’s roundup to those “green shoots”. The crash is coming either way, unless they print to infinity AND they constantly increase the size of the printing. It’s been reported that now for every $1 of GDP growth of the US economy, we need $7 of debt.

greenshootsIn that context, the right real estate to buy is the one that is more likely to be in demand during those crises.

 

— UPDATE —-

And we have the results:

As I was expecting: no tapering for the foreseeable future.

To keep a good control on the bond market, you need to pretend you might pull the trigger. ;-)

Nevertheless, unless they constantly increase the printing, we will end up with a market crash.

 

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