Monday, August 5, 2013

Bernanke has been a truly fantastic Fed Chairman

Bernanke has been a truly fantastic Fed Chairman and had it not been for him, acting as the "adult" in the room in the autumn of '08 the whole system might have collapsed. He will have my undimmed support for that decision alone.

Now, has he perhaps over-stayed the "accomodation" welcome? perhaps, but let's remember that "taperin' " ain't exitin'. To taper is to reduce the level of accomodation, but it is not a tightening move. Tightening shall require a full stop on securities purchases and then allowing the existing portfolio to mature off at a pace faster then the stream of income that shall flow to the Fed for years into the future. ...

So when do I think that QE shall truly end? Not for at least a year... perhaps two. We've got to taper down from $85 billion per month in new securities purchased to 75 to 65 to 55 to 45... and then allow those securities to mature off. That's quite some while into the future. Again, tapering is not the end of accomodation.