It seems the Fed is serious this time about starting tapering from its QEx foolishness—they’ve begun—and serious about continuing it—Fed Chairman Ben Bernanke, in his last FOMC meeting as Chairman, is unlikely to stop the taper, and incoming chairwoman Janet Yellen seems in no position to stop it.  And that’s generating some results.

[N]ow that the Fed seems set on drawing down the QE era, investors are hedging their bets and returning to dollar and euro assets.

The hardest hit are the countries with policies least able to stand without the Fed prop.  That includes Argentina, which the Kirchner clique has run like Venezuela without the populist charm.  Turkey’s lira has taken a bath amid the political showdown over corruption, a large current-account deficit, and monetary policy that has been too easy for too long.  Russia’s ruble is also hitting new lows against the euro, as its economy increasingly looks like a one-act play (oil).


A country that runs the world’s reserve currency is also the world’s central banker….  The last week’s exchange-rate gyrations are a repeat of what happened last summer when Mr Bernanke made clear he wanted to begin tapering the Fed’s bond-buying.  …  Now the Fed is leaking that it will keep tapering at its meeting next week, probably by another $10 billion, and markets are moving again.

This is hitting the domestic stock market, too, but then the market is not the economy—which is another factor underlying the domestic market’s negativity over tapering’s onset.

Get used to it, boys and girls.  We may be the world’s banker, but we aren’t the world’s piggy bank.

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