Today is the final FOMC Meeting for Ben Bernanke as Chairman. I bet if he had any idea of what he was getting himself into back in 2006, he would’ve stayed in the faculty dining hall at Princeton.
It’s too early to know how history will judge him. Today, however, the judgment will be flying left and right. My opinion as to whether or not the Fed should give us a token taper today is that yes, they should. And if it causes rates to spike or the market to sell off, so fucking what.
Get it on with it already.
Besides, the sentiment on QE’s efficacy is starting to turn. It’s beginning to feel more deflationary than anything else. Corporations are getting by via stock buybacks, they can grow earnings for years and years simply by shrinking the float. That way, they keep shareholders happy, hit their bonus targets and never have to take any risk. There’s no balls in that and there’s certainly no real economic benefit. Corporate CapEx used to average 5% growth per year but is been throttled back to only 1% a year since 2008. This is a primary reason why wages are stagnant, hiring is slow and expansion is still not happening.
As Dan Greenhaus demonstrates, dividends and buybacks have been prioritized over risk-taking and revenue growth and the endless quantitative easing by the Fed is what’s allowing that to continue.
That’s just a theory. I’m sure the opposite case can be made also, you can do anything with data these days, prove whatever you want depending on how you slice and dice it.
This isn’t an economics blog, this is an investor blog. As an investor, I say rip the damn band-aid off already and let the chips fall where they may. We haven’t had a 10% correction since the summer of 2011, it’s long overdue and if that’s what the result of a taper would be, then let’s have it. Everyone’s made plenty of money, time for a harvest.
And by the way, think about the optics of a token taper that doesn’t plunge the economy into recession (it won’t). What the hell will the policy bears say when the turntables wobble but they don’t fall down? Besides, wouldn’t that be a delicious goodbye for Ben to make? It would be like Bilbo Baggins leaving the Shire, Irish-exiting with a disappearing act in the midst of his own birthday party.
Anyway, I’m rooting for a taper today at 2pm. The economic data of late allows for one and it’s time to get policy off of DefCon 3 levels, five years since the worst of the crisis.
I don’t care much about the kneejerk reaction to the start of normalization. But I’ll be pretty excited about the improving psychology that ultimately blooms in its wake.
Just do it, Ben.