Fama on tapering–it all depends on your view of the Fed and the market.

Just watched a short clip on Zero Hedge with Ric Santelli and Eugene Fama discussing tapering.  Fama said that tapering would be a neutral event.

Fama’s point was that tapering is a simple balance sheet exercise whereby the Fed transfers the securities it has bought for the short term debt (deposits) it has issued.  I guess in a sense, if it is a neutral exercise, the impact would be determined by the interest rate differential on the two.  But it could be a lot more than this.

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