Yesterday we published commentary from Truth in Gold on why the Fed taper won’t happen- namely that the entire Western financial system cannot survive without the Fed’s $85 billion a month, and that rather than taper, the Fed will soon have to INCREASE the rate of QE.
Today, ahead of the FOMC meeting this week, SD’s Eric Dubin explains why on the contrary- the Fed could potentially cut MBS purchases by $10 billion a month as soon as September, in a massive public relations stunt that will likely have a half-life of 3-6 months before QE to infinityer is announced.
Eric Dubin’s take on whether the Fed will taper:
I think there’s a reasonable chance that the Fed will do one cut of about $10 billion off MBS purchases strictly for public relations and in order to instill the false idea (so-called preserving credibility) that the Fed stands ready and able to remove the punch bowl. All that will do is extend the life of the program and/or force the need for larger injections as early as just three months later (but probably about six months later).
I’m in the camp that they can’t end in toto for a very long time. But knowing how these arses work, I expect some public relations stunt at some point this year and the most likely FOMC meeting for this to happen is in September, given that there is a formal and full press conference scheduled for that meeting (not all FOMC meetings have the full press conferences). If the long duration end of the bond market has already backed up quite a bit higher in rates by then, perhaps this PR target date will be moved. But so far, it looks doable.