FED refuses to taper QE - what that means?

The FED refused to taper the QE program yesterday sending stocks to new highs. But what does no taper mean?

well first of all it means my prediction was wrong. it is very shocking to me now that Ben did not taper. a week ago i was in a good profit and now i'm back to the zero level. It is not a pleasant feeling but i wont try to justify my frustration by saying "the situation is still bad".

But the truth is - the very fact that Ben did not taper means the situation is bad! he used to fold QE1 and QE2 completely with pseudo-economic data much much worse than what we have today, but refuses to cut the QE with the current data. we're not even talking about folding the QE3 completely, we're talking about cutting it by about 15-20%! refusing to do so means - something is wrong...

and something is in fact wrong. the QE program helped the economy in some ways and failed to help it in other. we're seeing more employed people and that is good (the first graph above). we're seeing inflation getting up and that is not only good (though i'm a deflationist and i don't find inflation good at all) but it is inevitable. you cannot pump money into the system and not have inflation. it's like pumping water into a tank and not have water in there - it's just physics.

but what scares the FED is the housing market. it almost showed no improvement over the last 5 years despite the fact that a lot of purchases have been made in 2009 (see 2nd graph above)

new houses are not being built (graph 3). they're building twice as less houses now than they used to build in 2006.

maybe the FED is trying to play on the defensive. or what's more likely, and i've said it before actually - Ben wants to pass his office to the new chairman as it is! so he might not taper at all. and i also said it before that the FED might actually have no time to taper as the world starts to fall apart...

right now you can take pretty much any country and see how cheap dollar has a very negative affect on it. take the EU - as the dollar goes down the euro goes up ultimately damaging already damaged, possibly beyond repair, European economy. unlike in the States the employment is extremely bad in the EU. i think this taper was very much anticipated by the Europeans. and now that the tourist season is closing and less tourists come to Europe the rising euro only makes it worse. (read more on EU tourism and falling unemployment in Spain)

take the yen - it is obviously going to rise shaking the Japanese economy yet again. and when the yen rises the Nikkei usually falls...

take the aud - the Australians have been struggling to get the aud down to improve exports. and after they've cut the interest rates in half they get this pig that will bring the aud up damaging exports by making them more expensive to those that buy them.

who is buying the Australian exports? it is China primarily. so the costs for the Chinese will go up unless the Australians lower interest rates even further. but for now as the Chinese costs rise the final goods' prices will also rise ultimately adding some inflation...

and what good is inflation when 1/3 of the Chinese export market in the EU that has up to 27% unemployed people in some countries?... where is the demand coming from?... this is the question i've been wondering about! WHO IS BUYING if every fourth person has no job?...

and finally look at oil prices going up on both - the cheaper dollar and potential wars in the middle east. it looks like the US is aiming at finishing this world for good - they start wars and they manipulate oil prices by manipulating it's local currency (that also just happened to be the world's currency as well). if the war in Syria starts we might see oil prices as high as 150$ for barrel. and that's not beneficial even to the oil-exporting countries such as Russia because the local fuel prices rise and choke the economy from the inside despite the fact that the budget is growing due to exported oil...

no matter how you look at the situation there is clearly only one beneficiary to this and that is the US - absolutely selfish and indifferent...

but on the lighter note - we lived with this QE for a year. it doesn't really matter if it stays or if it goes. because we're not even talking about finishing the QE3! we were talking about CUTTING it. this absent CUT might not keep the markets rallying for too long because it is not that big of an issue! the bigger issues actually lie deep in the dark... and i'm currently writing about it. it's about why the fundamental analysis and the technical analysis will never show the upcoming crisis...

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