...Rather than explicitly describing the possibility of a reduction of asset purchases, recent Fed statements have merely said that policy would be "adjusted" according to incoming data. It has never said what direction that adjustment may take. Yet somehow the market has concluded that an imminent reduction is the only possibility. But the opposite conclusion is more likely. Recession avoidance is really the Fed's only concern and it will always come down on the side of accommodation. Therefore an expectation for a 2014 taper is just wishful thinking.
But that does not mean that QE will go on forever. It will come to an end, but not because the Fed wants it to, but because the currency markets give it no choice. A dollar crisis would ultimately force the Fed's hand, and the longer the Fed succeeds in postponing the inevitable, the more damage its policy mistakes will inflict on our economy.