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The question that concerns markets, taper/no taper, that was supposed to be based on unemployment, seems now to be based on rather different grounds.

Quoting Rosenberg,

From what I hear, Ben Bernanke convinced the FOMC in December that in order to get ahead of a potential ‘fiscal cliff’ in December, it was a matter of having to ‘shoot first and ask questions later’. In other words, take a pre-emptive strike in December against the prospect of falling off the proverbial cliff and into recession in the opening months of 2013. But what happened next was a fiscal deal that was reached in early January and the economy faced a hill, not a cliff. The economy still faces near-term sequestering hurdles, but the reality is that a bold policy move aimed at thwarting off recession is now being reconsidered. Bernanke apparently told the hawks on the FOMC that if the economy was not in contraction mode by now, the ‘tapering off’ talk would ensue — and that is exactly what has happened.

Finally, Edward Harrison, in his review of global market volatility (behind paywall), worries that the worst is still ahead of us with regards to fiscal contraction:

In North America, the talk is of tapering and the markets are in a tissy. It shows you that QE is really about risk-on risk-off and the markets are moving to risk off because they don’t believe in the Bernanke put anymore. In the real economy, it’s stall speed and I expect it to stay that way until Q4, when the next year of fiscal cuts come. The Republicans are now ready to make serious cuts to defense. Someone I know who does budgeting at Defense told me no one made any real cuts this year because they had budget headroom. The real cuts are coming in FY 2014. I think FY 2014 is going to be ugly.

Which rather means unemployment will not resolve to the levels required to end QE, but, it looks to end anyway. If that is the conclusion that the market comes to, rates will continue to rise and stocks fall as the big chaps re-position.

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