I have argued over the course of most of this year that there was no economic case to end
or curtail the Fed's major QE program. I also discussed earlier in the year how pressure
to reduce the QE program would rise by mid - 2013 as the Fed's balance sheet rose to the
top of the range for QE programs dating back to late 2008. There is no doubt in my mind
that a number of Fed staffers got very nervous about that, leading to "hall talk", babbling
over lunch, and leaks to The Street and the media which in turn precipitated the "taper talk".
The "taper" stuff was a dumb and costly idea and it is a shame that key board members such
as Bernanke, Bullard, Dudley, Evans and Yellen put up with it. Dumber still that so many
Wall Streeters ran with it and spun it.
I think the truth is that not only does the economy have to perform a lot better to warrant the
reduction of monetary stimulus but that a decision to curb stimulus will prove a risky bet
until well after the economy is functioning normally with income and credit flows that are
well recognized as adequate to sustain the economy in the absence of highly accommodative
The risk to the stock market and the economy of a premature curtailment of QE remains
very large in my view. QE has been there to keep confidence up and the deflationary
wolf away from the door.
I am sure Bernanke would like to eat out in Wash. DC on others' tabs but, as he completes
his valedictory lap, it would be nice if he called out the Congress again for their recklessness
in mishandling fiscal policy and, nice as well, if Obama got behind him.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!