And, finally, the exhibit which must scare the Fed the most, and, by itself, foretells a highly unlikely scenario in which the Fed would taper while this measure drops like a stone in the ocean; it's the money multiplier statistic calculated by the Fed to assess levels of credit expansion within the economy.
Exhibit E - M1 Money Multiplier
According to the exhibit E, money entering the banking system isn't multiplying by way of subsequent new loans issued via a system of fractional banking. In other words, business and consumers don't have enough disposable income or confidence in future income prospects to increase debt levels.
ConclusionIn short, given the components of GDP, where GDP = private consumption + gross investment + government spending + (exports minus imports), or GDP = C+I+G+(X-M), weak private consumption, weak capital expenditures and a trade deficit leave only government spending to replace the weak components. And while there appears to be no political will in Washington to drastically cut spending, the Fed must accommodate Treasury's need to fund itself. The two top creditors, China and Japan, have not kept pace with the rate of increase to the accumulating federal debt of $17 trillion (cash accounting). Therefore, the slack in demand requires another buyer to pick up the marginal drop in overseas purchases of US debt. That buyer must be the Federal Reserve, typically referred to as the lender of last resort. But, today, in this case, the Fed is now the buyer of last resort. There will be no taper any time soon. Follow @jasonbondpicks This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.