{"id":8778,"date":"2013-11-22T23:41:15","date_gmt":"2013-11-23T04:41:15","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=8778"},"modified":"2013-11-22T23:41:15","modified_gmt":"2013-11-23T04:41:15","slug":"why-does-qe-taper-spook-the-market-if-it-will-have-no-real-impact","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2013\/11\/22\/why-does-qe-taper-spook-the-market-if-it-will-have-no-real-impact\/","title":{"rendered":"Why does QE taper spook the market if it will have no real impact?"},"content":{"rendered":"<p>Question received from CG about the impact of QE and Fed taper:<\/p>\n<blockquote><p>I&#8217;m not arguing against the data presented on the graph, but if true that most of the QE bond purchases are being parked by banks in interest-bearing, excess reserve deposits at the Fed, why do the markets get spooked every time there are whispers that the Fed is going to reduce QE? <\/p><\/blockquote>\n<p>The comment CG is referring to:<\/p>\n<blockquote>\n<p>Currently, there is evidence of expansive monetary policy from the Fed, but the overall impact on the financial markets is muted. Most of the QE bond purchases are being parked by banks in interest-bearing, excess reserve deposits at the Fed. The chart below compares Fed balance sheet expansion (QE) to the increase in excess reserve deposits at the Fed.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" width=\"525\" height=\"315\" title=\"US Household Debt\" alt=\"US Household Debt\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2013\/2013-11-18-us-excsresns.png?resize=525%2C315&#038;ssl=1\" \/><\/p>\n<p> A classic placebo effect, the Fed is well aware that the major benefit of their quantitative easing program is psychological: there is little monetary impact on the markets.<\/p>\n<\/blockquote>\n<p>My answer:<br \/>\nThe markets have no real reason to fear a QE taper. I think this is more psychological than physical. The current mind-set is: <\/p>\n<blockquote><p>If the Fed begins to taper, that marks the end of the bull market in bonds. Rising bond yields and higher long-term interest rates may slow industry investment and recovery of the housing market and this would be bad for the economy.<\/p><\/blockquote>\n<p>In other words, they still have a bearish outlook. At some point they will shift to the counter-argument:<\/p>\n<blockquote><p>QE taper and rising interest rates indicate Fed faith in the recovery and are a bullish sign for stocks. It also means the economy is reverting to a sustainable path.<\/p><\/blockquote>\n<p>The bottom-line is that markets are driven as much by emotion as by logic. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Question received from CG about the impact of QE and Fed taper: I&#8217;m not arguing against the data presented on the graph, but if true that most of the QE bond purchases are being parked by banks in interest-bearing, excess reserve deposits at the Fed, why do the markets get spooked every time there are &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2013\/11\/22\/why-does-qe-taper-spook-the-market-if-it-will-have-no-real-impact\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Why does QE taper spook the market if it will have no real impact?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,34],"tags":[1313,2827,3329],"class_list":["post-8778","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-us-canada-countries-regions","tag-excess-reserves","tag-qe","tag-taper"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Why does QE taper spook the market if it will have no real impact? 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There is much discussion in the media as to whether various markets are in a \"bubble\". Little attention is devoted to the fact that bubbles can\u2026","rel":"","context":"In &quot;Market Insights&quot;","block_context":{"text":"Market Insights","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/market-insights\/"},"img":{"alt_text":"US Household Debt","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2013\/2013-11-18-us-excsresns.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2013\/2013-11-18-us-excsresns.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2013\/2013-11-18-us-excsresns.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":25928,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/05\/21\/rrp-a-fed-taper-by-stealth\/","url_meta":{"origin":8778,"position":1},"title":"RRP: A Fed taper by stealth","author":"Colin Twiggs","date":"May 21, 2021","format":false,"excerpt":"We will try to keep the jargon to a minimum, so that we do not get lost in the maze of financial markets. On May 20th, Tyler Durden published an article headed \"Fed Alert: Overnight Reverse Repo Usage Soars Above Covid Crisis Highs\" What is Overnight Reverse Repo? Overnight Reverse\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":11035,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/10\/01\/qe-the-end-is-nigh\/","url_meta":{"origin":8778,"position":2},"title":"QE: The end is nigh?","author":"ColinTwiggs","date":"October 1, 2014","format":false,"excerpt":"I have read a number of predictions recently as to how stocks will collapse into a bear market when quantitative easing ends. The red line on the graph below shows how the Fed expanded its balance sheet by $3.5 trillion between 2008 and 2014, injecting new money into the system\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"Fed Assets and Excess Reserves on Deposit","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-10-01-fedassets-reserves.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-10-01-fedassets-reserves.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-10-01-fedassets-reserves.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":7851,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/06\/03\/impact-of-qe-or-lack-thereof-is-reflected-by-excess-reserves\/","url_meta":{"origin":8778,"position":3},"title":"Impact of QE (or lack thereof) is reflected by excess reserves","author":"ColinTwiggs","date":"June 3, 2013","format":false,"excerpt":"JKH at Monetary Realism writes: ....there is a systematic tendency in the blogosphere and elsewhere to misrepresent the impact of QE in a particular way in terms of the related macroeconomic flow of funds...... Most descriptions will erroneously treat the macro flow as if banks were the original portfolio source\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":23975,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/02\/06\/does-gold-warn-of-another-taper-tantrum\/","url_meta":{"origin":8778,"position":4},"title":"Does Gold warn of another &#8220;taper tantrum&#8221;?","author":"Colin Twiggs","date":"February 6, 2021","format":false,"excerpt":"Gold is diverging from the inverted (x-1) 10-Year TIPS yield below. Negative yields remain strong at -1.02% while Gold weakened to $1786\/ounce. A similar divergence in 2012\/13 preceded a sharp rise in TIPS yields (shown as a fall on the inverted scale below). TIPS yields rose sharply, from May to\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":11338,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/11\/16\/monetary-base-and-deflation\/","url_meta":{"origin":8778,"position":5},"title":"Monetary Base and deflation","author":"ColinTwiggs","date":"November 16, 2014","format":false,"excerpt":"The Monetary Base consists of currency in circulation and commercial bank deposits at the Federal Reserve. Currency in circulation includes notes and coins both in circulation and held in the vaults of commercial banks. Commercial bank deposits at the Fed can be further broken down into required reserves and excess\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"US Monetary Base minus Excess Reserves and Currency in Circulation ROC","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-11-16-mbase.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-11-16-mbase.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-11-16-mbase.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/8778","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=8778"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/8778\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=8778"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=8778"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=8778"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}