Currency Wars author Jim Rickards reckons QE tapering will pause after March due to stock market event
Peter Cooper

The Federal Reserve will only continue its $10 billion-a-month reduction in its QE money printing program for another month before a crisis in the stock market intervenes and it has to stop, warns Currency Wars author Jim Rickards who forecasts gold will hit $7-9,000 an ounce in the next coming global financial crisis.

‘My expectation is there will be one more round of taper in the March meeting of the FOMC [Federal Open Market Committee] where they will probably taper another $10 billion,’ he told Epoch Times. ‘But by June it will become very apparent that the economy is stalling out, the stock market is going down. They risk a stock market collapse. I think they will stop by pausing the taper.

Yellen Pause

‘They won't increase asset purchases but they'll stop the decrease; what I call the Yellen Pause. But the market expects more tapering, so if they just pause that will be a form of monetary easing relative to expectations.’

Mr. Rickards thinks the Fed itself does not know what to do in current circumstances and ‘because they are manipulating markets, the whole world is somewhat confused.’

His conclusion: ‘It all comes back to the Fed and what economists call regime uncertainty. So I think we'll have that kind of volatility in the first half, but by the second half the US weakness will be apparent, the Fed may back off the tightening, and then emerging markets may rally.’

First-half correction

How big the stock market correction in the first half will prove to be, or how durable will be its impact, is not something about which Mr. Rickards is prepared to hazard a guess. However, his reasoning is hard to fault.

It was the QE money printing program that fuelled up the long rally on Wall Street that moved well ahead of profit growth last year, and as the same process unwinds so will the stock market.

Given that stock market reactions tend to be delayed and then turn into dramatic events his thoughts on the Yellen Fed probably have merit though his own recent record of second-guessing the Federal Reserve is far from perfect.

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