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Peng: Fed Tapering to What?

And, for the first time since early 2008, the nominal GDP growth fell below 3.7% since Q4 2012, as reported by ECRI :

"In any case, yoy nominal GDP growth at or below 3.7% has been seen only in recessionary contexts. In Q1 2013, it fell to 3.4%, the second straight quarter below 3.7%"

I don't think this necessarily means imminent recession, since core CPI has been stuck around 0, ( with the lastest, for April at 0.1% ), much lower than previous instances of 3.7% crossing. But at least it requires a strong dose of optimism boosting medicine to believe in the prevailing chatter about strong recovery after seeing this chart.

To summarize this part of analysis, QE may have prevented deflationary spiral, but stoking inflation is another matter and stimulating economic recovery is even further away. With Fed balance sheet projected to be $4 trillion by the end of the year, and assuming a simplistic flat maturity distribution over 10 years, it'd take $33 billion/month purchase just to avoid tightening. As an old Chinese saying goes, riding a tiger is the easy part; it's the getting-off part that bites.
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