Tuesday, July 2, 2013

The possibility of Tapering and QE

The economy absolutely can continue to grow with somewhat tighter monetary conditions. In fact, I think the economy can grow a lot better without the Fed's help. The Fed's help back in 2008 was to be lauded; it was fantastic. They did exactly the right thing. In 2009 and '10, the first rounds of QE were probably still to be lauded. They probably did the right thing; however, they overstayed their welcome. They've created a bit of confusion. And confusion breeds contempt, as I like to say.

The Fed understands it has to get itself out of the box that it has put itself in. The way to do that is slowly, over time. I find it amusing that people are already responding as if the Fed has already begun to tighten. We have to remember, the Fed is going to continuously add reserves to the system until middle of 2014. It will just be that they are adding at a lesser pace. It's not as if they have taken anything out of the system. I think the markets have overreacted.