As you can see the above chart shows just how volatile the market has become since Ben Bernanke got up and talked about the fed taper plans later this year. We have to remember again, that nothing has actually been done yet, but still the market is defiantly becoming a volatile beast. One week it is down on the next week skyrocketing. Most investors do not know what to think.
If the Federal Reserve begins pulling its irons out of the stimulus fire in September, the resulting rocketing of the dollar and accompanying deflation will lead the Fed to reverse course by early 2014.
So says Jim Rickards, managing director of Tangent Capital.
September tapering could also spur a rally in the dollar as well. But it is obvious to me that the fed really does not have a good plan at all.
The central dilemma: The Fed is feeling heat to ratchet down its $85 billion-a-month bond-buying program, which pressures the dollar because it is tantamount to printing money. Hawks are worried about asset bubbles and systemic risks. Growing speculation that the Fed would taper in September sent the dollar index to three-year highs early this week.
I do not buy all these tapering talks about September being D DAY! YES! I really do not think it is gunna happen. The reason is that there is probably more negative economic data coming down the pipeline, and if that is the case, the fed will have no other option but to continue with his massive stimulus program. It is a sad reality I know, however it is what it is. Eventually its going to end up with the implosion of the markets and also the economy, but we will save that post for a later date.
"However, if the Fed does taper in September, they will find the economy sinks much faster than expected and ... they will have to increase asset purchases by early 2014," he said. But it's September or nothing for tapering I think right now.
It seems that right now the fed are trying to fine-tune everything in a complex system, and that's impossible, infact it is almost like they are setting us up for our own ultimate demise, and putting it on autopilot and even sending us a note in the mail!
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