The Fed was created Dec. 19, 1913, so it’s just turned 100.
It celebrated by deciding to taper while going over the $4 trillion mark on its balance sheet.
Ben Bernanke’s last meeting as Fed chief saw him begin the long unwinding of his baby, quantitative easing (known as QE), by reducing his bond buying by $10 billion a month.
The move only means it will take two months longer for the Fed’s balance sheet to hit $5 trillion.
The controversial tactic, which had a meaningful impact in stopping the economic slide in 2008 and 2009, has had a declining return with each additional round.
Bernanke has set the table for his presumptive successor, Janet Yellen. The move was clear, its motivations not so much.
From where I sit, Bernanke has at least two potential motivations that were not economically oriented: protecting both Yellen and his — excuse the expression — legacy.
If you had listened to the Wall Street talking heads, you probably would have thought that the world would come to an end the day tapering begins.
And that is exactly why you shouldn’t believe everything guys in shiny cuff links and Italian loafers tell you.
The equity markets jumped nearly 300 points after an approximately five-minute sell-off to lure the shorts into the pool.
From about 2:05 p.m. to the close, the Dow Jones industrial average rallied nearly 375 points from bottom to top, which left the Dow at new highs and the short-sellers’ account balances at new lows.
The big remaining question about the taper, though, is: Why taper now?
Of course, the Fed governors knew that the final gross domestic product number for the third quarter was going to be 4.1 percent annualized, but don’t we need more than one inventory-building quarter before we sound the all-clear?