China cuts US debt holdings amid Fed taper

China reduced its holdings of US Treasury debt in December by the most in two years as the Federal Reserve announced plans to slow asset purchases.

US government bonds held by China – the biggest US creditor – fell by US$47.8 billion, or 3.6 per cent, to US$1.27 trillion, the largest decline since December 2011, Department of the Treasury data released on Tuesday shows. At the same time, international investors increased holdings by 1.4 per cent, or US$78 billion, in December, pushing foreign holdings to a record US$5.79 trillion.

Federal Reserve begins tapering massive bond-buying programme

As previously mentioned by Marc Farber, if there’s any ‘taper’, it will be largely symbolic and the problem will only resurface sometime soon down the road.

“So at some stage the economy will weaken again, and at that point, the Fed will argue, ‘Well, we haven’t done enough, we have to do more.'”

The Federal Reserve will reduce its $85bn a month in bond purchases by $10bn starting in January

The US Federal Reserve last night announced plans to start weaning America off quantitative easing (QE), in a move which signals the central bank’s confidence in the stability of the US economy.

The central bank said that it will pare its $85bn-a-month bond buying scheme back to $75bn next month, and continue ratcheting it down in “measured steps” if the US economic recovery remains on course.

“Major Shortage Of Physical Gold” Has Fed Greatly Concerned

As the world awaits the Fed’s decision, today a 42-year market veteran told King World News there will be no tapering and that the gold will soar “after the Fed has surprised the market tomorrow.”  Greyerz also warned KWN that to further complicate matters for the Fed, there is a “major shortage of physical gold” ahead of their decision.  Below is what Egon von Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say.

Greyerz:  “Eric, it is important to consider what the truly important factors are that will determine what will happen to the world, its people, and to the global economy.  If we look around, what do we find?  We find a world that is financially, politically, and morally bankrupt.

Fallout from Fed tightening will be worse than 1994, warns ECB policymaker

BRUSSELS — The spillover effects of the U.S. central bank unwinding its policy stimulus risk being greater now than in 1994, and that episode highlights the importance of clearly communicating exit strategies from expansionary policies, an ECB policymaker said.

The Federal Reserve is expected to start slowly reducing its bond purchases when it meets later this month, beginning to unwind a policy that has helped foster recovery in the world’s largest economy and buoyed financial markets.

“In early 1994, when the U.S. recovery gained strength, the Fed started a tightening cycle and bond markets crashed not only in the U.S. but also around the world,” European Central Bank Executive Board member Joerg Asmussen said on Tuesday.