The Taper Has Already Begun

It does appear that the much ballyhooed tapering by the Fed has already begun, despite all the will they or won't talk by Fed governors. Just a look at the numbers.

First, the following chart shows the 13-week annualized change in non-seasonally adjusted M2 money supply from 2008 through the present.


The growth in money supply is collapsing. More so, outside of the most recent reported week, the 13-week annualized change in money supply had gone negative.

Now, most would realize that a host of factors outside of the Fed's control can and will cause fluctuations in M2 money supply. If M2 was the sole data point to look at, the argument that tapering has already begun would be fairly weak. However, the growth in the monetary base, which the Fed most certainty has a direct influence and control of, has slowed, albeit from a high break-neck pace to a slower break-neck pace.



This leads me to conclude that despite all the talk in the media of when and if the Fed will taper their monthly bond purchases that the tapering has already begun. With the rate of money growth already slowing, a pullback in the monthly bond purchases by Fed has the potential to create some real fireworks in the markets.