The reaction to the FOMC no tapering news was a simple one "Party on dudes, in anything and everything, and in a big way."

For some intraday 5-minute charts of the US dollar, gold, the HUI, treasuries, and the S&P 500 stock market index please see So, It's No Tapering After All; Reaction is Telling.

How long this party lingers on will be interesting to see. Even though most market observers felt there would be some sort of minimal taper announcement today, is it really that relevant the Fed decided to keep asset purchases at $85 billion rather than $75 billion or $65 billion?

The one-day reaction says yes. And that is another indication of just how addicted to stimulus this market is. It is also an indication of something bigger (which possibly explains the reaction).

Until proven otherwise, the Fed is on a QE-to-Eternity mission. It wants to drive down interest rates until it believes in a recovery.

The $64 Trillion Question

The $64 trillion dollar question ($64 million buys nothing, and $64 Billion hardly anything at all) is "Then what?".

How and the hell is the Fed going to normalize interest rates with a recovery in full bloom, and interest rates three or full percentages points below normal?

I believe the answer is simple "It isn't". And if that is indeed the case, what was that huge selloff in gold all about in the first place?

10 Burning Questions for Bernanke

Bloomberg writer Caroline Baum has Ten Burning Questions for Bernanke (written ahead of the announcement). The first of which is a series of questions similar to what I asked above.

I generally spend Federal Reserve Chairman Ben Bernanke's post-meeting press conference hoping one of the reporters will ask what for me are the burning questions of the day. Since they never do, and in all likelihood won't later today, I'm going to ask them myself. Here goes.

1. Chairman Bernanke, the Fed's economic projections continue to put long-run full employment at 5 percent to 6 percent. The neutral funds rate -- the rate that will keep the economy growing at its noninflationary potential in perpetuity -- is thought to be about 4 percent. The Federal Open Market Committee has pledged not to raise the funds rate at least until the unemployment rate hits 6.5 percent, and there has been talk of lowering that threshold, perhaps to take the sting out of tapering.

Assuming those parameters are accurate, the funds rate will be 400 basis points below neutral at a time when the economy is approaching full employment.Do you see any risks associated with that strategy? Do you think forward guidance can minimize what are sure to be significant dislocations in financial markets?

The above emphasis on strategy risk is mine

One-Sided Risk Assessment

Risks? Does the Fed Ever See Risks?

Actually the Fed sees risks all the time. But it's all one-sided. The Fed never sees risk in doing too little. The Fed always sees risks in doing too much.

The result is a series of bubbles of ever-increasing amplitude.

Today, the Fed is worried about a pissy taper in reducing asset purchases from $85 billion to $75 billion.

Fed Bizarro World

In Fed Bizarro World, $75 billion in asset purchases monthly is "too tight". Let that sink in.

Reflections on Gold

And somehow that "tight" policy was supposed to be bad for gold.

Well, it was, for a while. And perhaps it will remain so. But perhaps not, and that is how I am betting.