Google Plus Facebook LinkedIn Twitter Vimeo RSS
CPBJ Extra Blog

Taper, baby, taper

By ,

Remember how the world was supposed to end when the Federal Reserve started the scaling back of bond buying?

It didn’t, it hasn’t and it probably won’t.

For the fourth time in five months, the Fed announced it will ease — OK, go ahead, you can use “taper” — its bond buying, pointing to increased signs the country’s economy can move out of its parents’ basement and make it on its own. That came after months of fear over what would happen when tapering eventually, inevitably, happened.

Here’s the great part: No one seemed to care this time around. In December, the first time the Fed dared say it would start to taper its bond buying, the Twitter reaction made it seem like there were people holed up in bunkers hoarding rations of food and water like it was New Year’s Eve 1999 all over again.

In November, I wrote a taper pro-con blog, not taking either position, but playing devil’s advocate for both sides. I got some negative response for actually suggesting it could be a good thing to taper at that point. It led to a Twitter debate with some politicos who warned me that if the Fed starts tapering, we were going to get rocked back into recession, and probably depression.

That hasn’t happened. That’s not to say it can’t or even won’t happen in the future, but it hasn’t happened yet, and the drop-off has been surprisingly drastic in just four months time. We’ve nearly cut the bond buying in half — from $85 million to $45 million — without more than a hiccup from Wall Street. The Fed made the announcement at 2 p.m. Wednesday. By the time the market closed, the S&P 500, Dow Jones and Nasdaq were all up for the day, and the Dow closed at a record high.

The first announcement of a taper on Dec. 18 didn’t make much of a dent on the market, but on Jan. 28, the Dow was at 15,928.56. The Fed made its second taper announcement Jan. 29. On Feb. 3, it bottomed out at 15,372.8, a fast 3.5 percent drop in fewer than four business days. In March, it was the days leading up to the announcement where there was a drop, and only a slight dip March 19, the third taper announcement.

And this time, it’s nothing, barely even a blip on the radar.

Interpret it however you want. Maybe there was a legit fear on Wall Street that tapering would cause economic havoc. Maybe it was pure paranoia by a legion of brokers who lost their shirt, pants, shoes and pajamas in 2008 and 2009. Or maybe it was an effective fear campaign orchestrated by the best minds on Wall Street to keep the good times flowing, even though most of the world could see the market looked just fine, thanks.

Whoa. This just got a little conspiracy-theory-centric. Hey, you got a half-hour to read a 2,500 word opus on who really shot Kennedy?

Didn’t think so.

Anyway, after the market dip in late January, you could almost see new Fed leader Janet Yellen scrolling through her Twitter feed after the March announcement, looking for the wailing and moaning. Almost like The Grinch, with his hand to his ear, waiting for the wailing and moaning of Whoville after he stole their presents. It never came for either.

This is no guarantee the economy can survive without its Fed-backed training wheels as it learns to ride a bike again. At the very least, it’s the middle ground, and not anywhere near the dire situation we were warned about during months of back-and-forth taper talk.

And best-case scenario? Yeah, the economy can survive on its own, so go ahead and shed $5 billion of bond buying every five or six weeks and we can all get back the new normal of sweating — but making — our mortgage payments instead of ignoring the three-month, past-due notices on our houses and business leases.

I really like that best-case scenario.

More from the CPBJ Extra Blog

Write to the Editorial Department at

Leave a Comment


Please note: All comments will be reviewed and may take up to 24 hours to appear on the site.

Post Comment
View Comment Policy