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Affluent Christian Investor | December 12, 2018

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Annals of Overblown Stories: Tapering Will Kill Emerging Markets

Photo by Getty Images

Photo by Getty Images

I’d like to contrast the ‘big’ investment stories (as defined by press coverage) with the important stories as measured by principled reasoning.

Tapering is the biggie: Markets ebbed and flowed reflexively in response to the expectations that Quantitative Easing would be tapered. Not just actual announcement of tapering, but hints of future announcements, slight variations in word choice parsed and re-parsed, led to wide swings in global markets. Eventually, ‘parsing’ became in many investors’ minds a synonym for ‘tightening’. Commentary in the press almost universally promoted the idea that when tapering would finally appear it would lead to widespread declines in global equity markets, especially in the emerging markets. It was widely expected that developed markets would be immune from these sell-offs. These ideas were promoted so heavily and confidently that they were generally accepted without question.

But they were wrong. Tapering was begun, but it did not amount to monetary tightening. The Fed’s balance sheet continued to balloon; at this writing it stands at over 3.9 trillion dollars, is still growing, and has grown consistently throughout the tapering process. While tapering has decreased the rate of growth of medium and long term bonds, the principle area in which the Fed injects new money directly into the system is the very short-term FedFunds. And the Fed has been cutting rates there over the past year from approximately .15 a year ago to .08 in recent months. Money supply continues to grow at a fairly rigorous pace.

Commentary was also wrong about equity markets. They did not crash in response to tapering, because tapering is not tightening. Emerging markets did not collapse, they have performed fairly well year to date during the tapering process, and have handily outperformed Japan, which was widely believed to have been immune to the alleged tapering effect, though not the U.S.. The ‘big story’ basically turned out to be wrong.

Jerry Bowyer is a Forbes contributor, contributing editor of, and Senior Fellow in Business Economics at The Center for Cultural Leadership.

Jerry has compiled an impressive record as a leading thinker in finance and economics. He worked as an auditor and a tax consultant with Arthur Anderson, as Vice President of the Beechwood Company which is the family office associated with Federated Investors, and has consulted in various privatization efforts for Allegheny County, Pennsylvania. He founded the influential economic think tank, the Allegheny Institute, and has lectured extensively at universities, businesses and civic groups.

Jerry has been a member of three investment committees, among which is Benchmark Financial, Pittsburgh’s largest financial services firm. Jerry had been a regular commentator on Fox Business News and Fox News. He was formerly a CNBC Contributor, has guest-hosted “The Kudlow Report”, and has written for, National Review Online, and The Wall Street Journal, as well as many other publications. He is the author of The Bush Boom and more recently The Free Market Capitalist’s Survival Guide, published by HarperCollins. Jerry is the President of Bowyer Research.

Jerry consulted extensively with the Bush White House on matters pertaining to the recent economic crisis. He has been quoted in the New York Times, The Wall Street Journal, Forbes Magazine, The International Herald Tribune and various local newspapers. He has been a contributing editor of National Review Online, The New York Sun and Townhall Magazine. Jerry has hosted daily radio and TV programs and was one of the founding members of WQED’s On-Q Friday Roundtable. He has guest-hosted the Bill Bennett radio program as well as radio programs in Chicago, Dallas and Los Angeles.

Jerry is the former host of WorldView, a nationally syndicated Sunday-morning political talk show created on the model of Meet The Press. On WorldView, Jerry interviewed distinguished guests including the Vice President, Treasury Secretary, HUD Secretary, former Secretary of Sate Condoleezza Rice, former Presidential Advisor Carl Rove, former Attorney General Edwin Meese and publisher Steve Forbes.

Jerry has taught social ethics at Ottawa Theological Hall, public policy at Saint Vincent’s College, and guest lectured at Carnegie Mellon’s graduate Heinz School of Public Policy. In 1997 Jerry gave the commencement address at his alma mater, Robert Morris University. He was the youngest speaker in the history of the school, and the school received more requests for transcripts of Jerry’s speech than at any other time in its 120-year history.

Jerry lives in Pennsylvania with his wife, Susan, and the youngest three of their seven children.


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