Tapering in perspective

Since the US Fed ‘shocked’ the market by not tapering in September the speculation continues on ‘when’, and markets fluctuate accordingly.  The Fed (simplistically) prints money and buys the bonds (about half US treasuries and half mortgage backed securities) with it.  This debt is added to their balance sheet.  Tapering doesn’t magically make the $4 trillion of debt taken on to print this money disappear.  The graph puts this into perspective and shows what happens if they taper by $10b/month for all of 2014 (as unlikely as we think that is…).  Many believe there is no exit from this position without a crash of epic proportions.  They are damned if they taper and damned if they don’t.  Have a look at what gold and silver prices have done since the GFC….