I announced a contest in my last article challenging readers to find a grammatical error in a German headline.  We had many readers respond including at least one from India showing that people still do study German.  Our winner is named Reeves and won the prize of a subscription to my newsletter. I am not sure whether Tapering is masculine, feminine, or neuter. The error in the NZZ headline was using mir for mit. It should have read: "Das Fed beginnt mit dem Tapering". I found it funny because only half the words were German and one of them was misspelled.  On to today's topic: Taper Discipline.

The Chinese banking crisis came before the implementation of even partial liberalization of its financial system, via, for example, a free zone in Shanghai. This has kept the rout controlled within the country expect for the spillover to the Hang Seng index.

With the beginning of the taper of quantitative easing, global markets also will lose part of their addiction to cheap, abundant finance. There will be more discipline. Unlike in China, the impact will be multinational, but not necessarily wholly negative. Higher rates first of all will reward savers and those buying bonds in the future.

For equities, more expensive money will create a more sustainable financial market. Assets will be valued in a more balanced way rather than because of debt-finance being available. I expect fewer stock buy-backs when money gets tighter. Companies will not be able to borrow as freely to engage in value-destroying mergers and acquisitions. Some current proto-bubbles will not grow to dangerous proportions.

Flows into foreign stock- and bond-ETFs (exchange traded funds), which usually track broad indexes, have also been tapering. Redemptions are at new highs since the Fed last threatened to lower QE2 according EPFR which tracks flows.

Meanwhile our forte, stock-picking rather than buying indexes, will become more important. A rising tide lifts all boats. But a falling tide will hurt the leakiest and most speculative vessels.

So in general I am glad the the taper is starting, particularly since US growth over 4% in the last quarter probably was one of the factors leading to the Fed decision yesterday. (It was only announced today but the Fed gets numbers before the public.) Naturally I want the US to lead the world out of the global financial crisis which has held back economies for too long.

A stronger USA will start out by improving the outlook of America's closest neighbors and trading partners where we have boosted our positions, Mexico and Canada and probably also boost the loonie.

Also helping our region is the reversal of oil and gas finance flows overseas, with the money going to frackers and to stop flaring all that gas. This will go some way to making my retirement money go further. For economic as well as strategic reasons, I favor greater US energy independence. Why should we ship off huge sums of money annually to despotic regimes to feed our oil addiction?

I also hope that some of the bonus from fracking and offshore hydrocarbon finds will be shared with friendly countries because markets for oil and gas have always been global. Energy autarky makes no sense in an interrelated world.

The present regional imbalance may mark an end to the close correlation of markets. With exits from the largest emerging markets and from gold, the world may move away from a one-size-fits-all calculations of value. As the cost of money rises, the cost of risk will rise too. And markets, not central banks, will set interest rates. We'll focus on higher yielding stocks with less cyclical profits as rates begin to rise.