The Tapering, it sounds like the title of some new Stephen King horror novel, but it is not as scary as it sounds. Tapering is a tried and true training technique employed by athletes. Athletes will taper off their training exertions in the days preceding a big event, like an important race. Easing up a bit, allows athletes to rest up a bit and husband their strength and stamina for the coming main event. Some athletes have reported undesirable side effects from tapering. Tapering sometimes leaves the athlete feeling down or depressed. The athlete’s friends and family members might also notice increased irritability or grumpiness. These are classic withdrawal symptoms, in this case a withdrawal from exercise.
The Tapering is the name that Wall Street has given to the Federal Reserve’s anticipated curtailment of Quantitative Easing. For many months now, Ben Bernanke and the Fed have been pumping boatloads of money into the US banking system and markets, most recently to the tune of $85B per month. Helicopter Ben and his gang of Federales has been the only arm of government that has been making any effort of late to stimulate the economy and get this country out of the deepest recession since the Great Depression. Republicans are doing worse than nothing and have deadlocked the rest of government. Only the Fed has been free to act, but its only tool is to throw more money at the problem. I guess that if you have an infinite supply of money, then just throwing it eventually becomes an effective weapon, because last week Ben let it be known in the most gentle terms that the party might someday come to an end.
This little hint that someday, in the indeterminate future, Quantitative Easing would be gradually eased out has spawn the term The Tapering and caused the stock markets fits. On the one hand this is a good thing; experts at the Fed are glimpsing the light at the end of this long dark recession. Economic indicators are looking more positive. More people are finding jobs than losing them, albeit not at a quick enough pace. Even the housing market is beginning to show the first few tremors of life. On the other hand, the stock market’s free money fed frenzy may have to come to terms with reality. The economy is slowly, but steadily improving since the dark days of deep recession, but has it really improved as much as the record levels of the DOW and S&P seem to indicate? Bernanke and company will now have to demonstrate a finesse to rival their already demonstrated courage and successfully wean those cranky Wall Street Olympians off the Feds teat. It would be better for all to avoid those pesky tapering side effects, like depression.