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FED Taper: $900 Billion a Year . . . Guaranteed

Written by Gary North on December 19, 2013

The Federal Reserve will continue to expand the monetary base by $900 billion a year. This is down from $1 trillion a year, or a reduction of 12%. The announcement triggered an increase in the Dow Jones Industrial Average of 293 points.

The FOMC released a statement, as it always does. This statement removed all threat of any reduction in the policy of monetary inflation. The FED will maintain its “highly accommodative” policy for years. It’s now official.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.

Excuse me? How can a highly accomodative policy continue for a considerable time “after the asset purchase program ends”? Isn’t monetary policy based on asset purchases? No one asked this at the press conference. Someone should have.

This was Fedspeak for “bond market subsidy.” If the statement means anything, it means that the FOMC will start buying short-term T-bills instead of subsidizing Fannie/Freddie mortgages and T-bonds. If it does not mean this, then it is meaningless. But the financial media are content with meaninglessess, as long as continuing FED expansion is now guaranteed.

The phrase “considerable time” means indefinitely. The Committee still will use 6.5 unemployment and 2% CPI inflation as its standards. It will also use unnamed other criteria, which will never be identified in public.

In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.

Translation: “We will continue to make this up as we go along.”

How long will this last?

The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal.

Translation: “$900 billion a year is the new normal.”

The Federal Reserve had previously established targets for justifying a reduction: unemployment at 6.5% and an increase in the Consumer Price Index of about 2%. The unemployment rate is 7%. The CPI is flat. So, the only two explicit targets meant exactly nothing. The Federal Open Market Committee reduced the rate of monetary expansion by a token amount. But it made it clear that this token reduction is all the markets need fear.

We can see what the Federal Reserve has done to the monetary base. It has done it in spurts.

AMB-1213(For the rest of my article, click the link.)

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10 thoughts on “FED Taper: $900 Billion a Year . . . Guaranteed

  1. This is not going to end well!!!

  2. Counterfeit is counterfeit and its other arm remains devaluation… as in stripping the pensions and other long term secure savings. A change from one trillion to nine hundred billion is akin to promising they'll only rob 9 banks a day instead of 10! Theft is best described as “unfunded liability” essentially “off the books” to account for wealth (purchasing power of saved currency) that predictably disappeared because government “printed” bonds and currency that did not represent productive marketable resources!

    The average 2012 wage ($42,537) over 46 working years generates enough wealth @14.2% SSI tax earning 5%compounded to provide a 13.5 year pension (65/78.5) totaling $1,296,880! Instead of that, SSI avg. pays $200,070 per retiree or $283,733 with all SSI beneficiaries. Over a million disappeared! Because about 97% of the “trust fund earning 5% avg.” disappeared, one might say the $1751.44/mo composite SSI benefit total ”consumes” 4.0 worker contributions of $439.55/mo., meaning everything one puts in it is consumed – devoured by political plunder and corruption! The BLS COLA history will provide the road map of plunder if one considers the secondary CYA blunders along the way.

    Reality says a 2.7+% SSI tax will provide those $1,752 composite SSI benefit totals and pay retiree individuals a total of $283,745 from 65 to 78.5! The truth will set us free when we prosecute and jail liars and thieves instead of electing them to rule and judge us! We need a safety net, not a trolling net!

  3. The statement regarding $900 billion is irrelevant, as, I believe, that although the Fed had set a limit of $1 trillion, the never exceeded $850 billion. So what they are really saying is, "you rich folks relax, we will keep propping up the stock market and forcing interest rates down. We'll take care of you." But one of these days it has to happen or we will be a rerun of Weimar Germany. The dollar will just collapse. This is politics at it's worst. This is selling out your country! See my blog at http://cranky-conservative.blogspot.com


    The fact that one can't define and describe homosexuality without being offensive can not be allowed to be elevated to a sanctified religious covenant of "marriage". The right legally binding word is “partnership”! I don't mess with anyone's private life & belief – don't mess with mine – if you respect the Constitution & law thereunder, we'll be good friends & respect each other's lives.

  5. I love your SSI calculations and commentary and agree with your logic and calculations.
    I do not have the numbers, but I would love to see a similar calculation done on public employee pensions. I know us taxpayers have been getting hosed for the last 25 years where they pay in a pittance of what they take out of the corrupt system leaving the taxpayer footing a ridiculous bill.

  6. Sounds like the Fed is determined to monetarize the US debt….. guess who gets to pay for it?

  7. they will taper to zero in 2014- the sooner the better. then finally gold stocks can move higher.

  8. You’re darn right. Nothing that’s been put in place in the last 10 years is going to end well, and only the child-minded can’t see it.

  9. From 1000 to 900 is 10% not 12%

  10. TraderFred says:

    The Flogging of tax payers by the private Federal Reserve and their wealthy friends will continue until the taxpayers stop pretending they have any influence whatsoever in the political system.
    The chart shows that the Demo-Publican Party is clearly getting its share of freshly printed money.
    Your opinions, your concerns and your votes are futile.