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What Happened The Last Time A Major Central Bank “Tapered” QE?

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Zero Hedge
December 19, 2013

After having followed a zero interest rate policy strategy and facing a further deteriorating economy in an environment of falling prices (deflation), the Bank of Japan (BoJ) announced the introduction of QE on 19 March 2001 and kept it in place until 9 March 2006. The BoJ chose for a very orderly and gradual unwinding of its government securities portfolio, by continuing its regular purchases of these securities (i.e a taper and not sale).  The market rejoiced at the normalization for a week or 2… before dropping 24% in the following 2 months. Of course, that was a “policy mistake”; the Fed knows this time is different.

 

What Happened The Last Time A Major Central Bank Tapered QE? 20131218 taper1 0

Think 24% is ok and Fed will just rescue stocks again?… things “esclated”…

What Happened The Last Time A Major Central Bank Tapered QE? 20131218 taper2 0

to end -75%.

Awkwardly that lines up with the 1920/30s analog we have previosuly noted

What Happened The Last Time A Major Central Bank Tapered QE? 20131206 1929

This article was posted: Thursday, December 19, 2013 at 6:54 am





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