taper teapotThis week’s meeting of the Federal Open Market Committee (FOMC) had traders, market commentators and investors almost in a frenzy as they tried to predict the outcome. This was the meeting where economists expected the Fed to announce the ‘tapering’ of its monthly purchases of $85 billion of Treasury securities and mortgage-backed bonds. According to a Bloomberg News survey of 34 economists last week, they expected the Federal Reserve to taper its monthly bond buying by $10 billion, to $75 billion.1 But they were wrong.
While much ink has been spilled about ‘tapering’ of assets purchases, it now seems that this extended discussion of reducing monetary accommodation was nothing more than a ‘taper in a teapot’.

San Francisco Mint Silver Eagles As Low As $3.29 Over Spot at SDBullion!

Silver Eagles Bridge
By David Franklin, Sprott Asset Management:

Market reaction was harsh when Mr. Bernanke suggested in June that it would be “appropriate to moderate the monthly pace of purchases later this year [and] continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year”. The real damage was felt by the bond market with the yield on the 10-year note increasing from 2.16% to as high as 3%. This 39% increase in yield had bond investors facing an annual loss for only the third time in 33 years.2 However, after guiding towards a reduction in stimulus for the last four months ‘tapering’ was not to be – at least not yet.

The FOMC “decided to await more evidence that progress will be sustained before adjusting the pace of its purchases”.3 They concluded that “downside risks” to the outlook have diminished, the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement.”4 Gold and silver rocketed upwards and the Dow Jones Industrial Average and the S&P 500 were both pushed to new all-time nominal highs. In fact, monetary accommodation in 2013 is much larger than the headlines would suggest.

buff sale(2)

According to data compiled by Bloomberg, the Fed’s balance sheet has been increasing at an average rate of $91.9 billion each month during 2013 – yes, more than the $85 billion headline number. While the Fed has been buying assets at a rate of $85 billion per month, they have also been further adding to their purchases by investing earned interest and proceeds from maturing bonds. The largest single monthly addition to their balance sheet in 2013 was during the month of April when the Federal Reserve added $114.7 billion of assets, almost $30 billion more than the stated purchases of $85 billion. These monthly additions vary given the timing of maturing bonds but the accommodation provided by the Fed is much larger than the headlines suggest.

For weeks now, gold bears have been out in force believing that ‘tapering’ would mark another leg down for gold. Given the drop in the gold price each time tapering is even hinted at, one might not be surprised at this prediction. But with tapering delayed, gold and the other precious metals appear to have found a bottom and now have limited downside.

While much ink has been spilled about ‘tapering’ of assets purchases, it now seems that this extended discussion of reducing monetary accommodation was nothing more than a ‘taper in a teapot’.

 


1 http://www.bloomberg.com/news/2013-09-13/fed-s-taper-start-seen-as-non-event-in-poll-of-investors.html
2 http://www.telegraph.co.uk/finance/personalfinance/investing/10301403/Bond-investors-face-annual-losses-for-only-third-time-in-33-years.html
3 http://abcnews.go.com/Business/wireStory/text-federal-reserves-statement-wednesday-20295960?singlePage=true
4 Ibid.
    • A guy like Sprott merrily goes along, making his billions, when he suddenly finds himself in the role of truth-teller, calling out the powers-that-be. Sprott has more impact, influence and effect than cities full of Wall St. Occupiers, or headbandanaed radicals. He knows where the soft spot is in the belly of the beast, and takes his shot. Go Sprott. Go Silver. 

    • lol
      Well can’t help but think – IF –  we were living a Box Office Smash Hit ‘Chick Flick’  Bart Chilton would shock the world on Friday at a noon press conference, with an announcement of multiple subpoena’s being served only hours before and wearing a referee’s whistle instead of a tie…..

  1. ‘But with tapering delayed, gold and the other precious metals appear to have found a bottom and now have limited downside.’
     
    Delayed???? It has now been CANCELLED. Was this article written months ago?

    • By delayed, they mean postponed until the economy gets better.  Even though the money is for the banks, not the economy.  The Wall Street Casino is losing some major bets that they have to cover.  And I don’t think these trades are on any offical company computer or cabinet file.  It won’t take too many bad bets they’ve made in derivatives to start a chain reaction that will take the whole system down.  Remember, AIG was the bad bet that took out others along the way, like dominos.  The way things are looking right now, it’s only gonna get worse and lead into another 2008 that ends the game.

    • @SilverHawk … you are right. It hit me today with all the new BS about taper in December, that TAPER = RECOVERY. Nobody believes the BS about recovery anymore, and so … they come out with a new version of that (enter TAPER), which they endlessly talk about while everything goes to hell. Along with the Fed being in a ‘corner’. Yeah right. But, this talk of taper, as a substitute for talk of recovery, won’t work so good after this month’s dupe, because nobody will forget what just happened.

  2. So, Bernanke & Co. have decided not to taper at today’s meeting, huh?  Well, there we have it, folks:  tacit admission from the Fed that the economy is worse than they’ve been letting on, unemployment is higher than they have been admitting, and the shrinking of the US GDP continues unabated since it has from 2005 to date.  The current set of Gov and Fed policies have to be the absolute worst since the founding of the Republic… and this IS the result. Gee, thanks.  I sure am happy to be paying all these taxes so that we can afford to hire and elect all these brilliant people to run this so perfectly for us.  Pray to God that the relievers don’t come in because the opening team absolutely SUCKS!  :-(
     
     

    • >>> tacit admission from the Fed that the economy is worse than they’ve been letting on
      But wait until the next Fed minutes Ed, they will taper then right? …LOL. The whole world economy is fixated every Fed announcement to see what these fools ‘might’ do.
      Currency debasement mode = death spiral.
      All the talk of cancelling taper is like wishing for a sustainable 2 day work week. I will never see it in my life time, but I Wish, I Wish, I Wish, I had a 2 day work week. If you say it 3 times it is more likely to come true I have been told. Bernanke needs to click his heels together more effectively when he wishes he wasn’t simply a crude currency debaser.

    • Job Conditions
      Fed policy makers said they want more proof of an economic recovery before curbing their $85 billion-a-month asset-buying program, known as quantitative easing, surprising analysts predicting a $5 billion cut to Treasury purchases.
      Fed Chairman Ben S. Bernanke said there is no fixed schedule for tapering, which could still start this year. A statement saidinterest rates will stay near zero while unemployment exceeds 6.5 percent and inflation tops 2.5 percent.
      “The Fed statement was noticeably dovish,” said Yuki Sakasai, a foreign-exchange strategist in New York at Barclays Plc. “There is expectation that there may be more QE.”
      The dollar declined 2.1 percent in the past week, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen lost 1.3 percent and the euro was little changed.

      http://www.bloomberg.com/news/2013-09-18/dollar-trades-near-7-month-low-versus-euro-as-fed-avoids-taper.html

    • @Ranger… thanks, buddy.  A little support now and then is a nice thing… and appreciated too.  :-)
       
      @WillNotBeASlave… “But wait until the next Fed minutes Ed, they will taper then right? …LOL. The whole world economy is fixated every Fed announcement to see what these fools ‘might’ do.”
       
      Probably so.  They are like the jiggling hand of the magician that is not doing anything but attracting the crowd’s attention. It is the OTHER hand that is doing all the work of the trick.  Maybe that is the one that is pulling the PRINT MONEY lever?
       
      @NetRanger808…  good point on the USD.  Watching it will tell us what the big-time financiers around the world really think of the Fed’s performance.  Bernanke talks and the USD flops.  This is not what one would call a good report card.  Those who know the most about money and finance are unimpressed… and it shows.
       
       

    • Not a bit of it, Shamus.  I would not touch SLV in any way with a stick, let alone go long or short with it.  BAH!  HUMBUG!  lol
       
      Messing with GLD and SLV seems to me like playing poker with people I don’t know and who insist that we use their cards.   ;-)
       

  3. Has anyone noticed that they will NOT let the dollar go below 80.00. It is just consolidating at this level. They absolutely know that if the dollar hits 72.00 it is done! Silver & Gold skyrocket and just let it move forward. There is a movie coming out with Ben Afleck and Justin Timberlake. They go into this Vault and there are Kilos of Gold. Think that didn’t send a message to all those in the loop. By Gold and buy it now.

  4.  am posting this week’s Friday Road Trip a bit early as I have a few conflicts over the next few days that will take me out of the loop. Not the best time to be out of the loop but life goes on.
     
    The Friday Road Trip has been posted below for Private Road Members:
     
    http://www.roadtoroota.com/members/1269.cfm
     
    Topics this week include some juicy topics:
     
    - Roota Knew The Fed Would “SURPRISE”…and she KNOWS What Will Happen Next!
    - Chief Gold Rigger Told to STAND DOWN!
    - Gold Panic in the Oval Office
    - My Mistake: Derivative SUCCESS Assures Counter Party Failure
    - Our Hidden Monetary History will Take Down of the Cabal 

     
    I’m sending this out at midnight Pacific Time on Wednesday night…by tomorrow morning JP Morgan should be the talk of the town as charges are revealed in the London Whale case as well as the added feature of the CFTC wanting more than just a slap on the wrist.
     
    More to come from the CFTC over the next few weeks on that front.
     
    The battle has gone HOT!
     
    May the Road you choose be the Right Road.
     
    Bix Weir
     
    Well what is going on with the CTFC?! We want prison sentences! 

  5. Interesting rates are back up today… I would have thought they’d be down a lot more at this point. If rates do not have a signficant correction soon (below 2.5% or so on the 10 yr), the fed has a very big problem on their hands. Perhaps, despite the demand from the fed, private owners of bonds are selling due to much increased inflation expectations…

  6. Yesterday’s decision by the Fed has caused oil prices to surge.
    So they managed to once again screw the ordinary, hard-working American who has to pay more for gas at the pump, and to heat his home this winter.
     
    Thanks Ben!

    • Hey, but there will be no big inflation right? The trained Keynesian Economists are never wrong.
      Monetary Inflation X% = Total World GDP Growth X%  … with NO exceptions. Median Wages will increase at X% also.
      It’s a closed equation and every dollar spent is used for 100% productive and innovative purposes.
      The children will live in a Utopia before long, and it will be raining down marshmallows on gingerbread houses!!…at least in Wall Street it does every day, so the rest of the country will follow soon I’m told. Detroit is an outlier and no need to focus on it any more than we have to.

  7. Hi boys and girls, today’s news it brought to by illusion created a long time ago by the elites. Whether a red or blue gang it is there to keep the rich, rich by having us peasants & slaves worshiping the USD. Now Gold and Silver IS another issue because the elite want to take it away from people through manipulation of debt & death by focusing on computers AND clones. Yes, you heard that right, interactive computers ( holograms ) They need Gold and Silver to make these computers. People are no longerngoing to talk to each other because clones will take its place. Have you ever met someone who didn’t have a soul? Mr Smith in the movie Matrix is not far behind. As Ben Bernanke said, “A barbaric relic” is coming true, unless we get together & prosecute all of the individuals in Washington Dc. BRICS countries are moving full steam ahead and the next meeting is going to be in India. My bad, right after the G20 mfg there was a BRICS meeting which talked about Real Debt backed by Real Assets.
    Like I said before, look up news in other countries to welcome you back to the human existence to the world.
    Resources: disclosurechannelTV2.com September 15, 2013. Ten minutes after news-30 minutes with Sophia Stewart talking about releasing Matrix 4 & 5.
    Remember, have not, want not. Except Silver

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