COLD TURKEY AND TAPERING
On top of the normal reasons for the market’s historically erratic summer behavior (see my column last week), this year we have to deal with the whole tapering issue. The Fed, which has been keeping the economy on life-support for years now, realizes that it cannot continue doing so indefinitely. Thus its choice: End the $85 billion monthly injections made by buying bonds, all at once (cold turkey), or gradually wean the economy by lowering its buying program bit by bit (tapering). The analogy to someone with an addiction - cheap money, in this case – and on life-support is neither accidental nor inappropriate. But whatever your opinion of the Fed’s policies, it is not a stupid organization run by dummies. So tapering it is.
And therefore, much of the recent conversation ‘round the markets' is about when and how much the Fed will decrease its bond purchases. Waiting ... Log in or subscribe to continue reading.
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