108 THE BiG DROP
Committee of the Bank of England, which is the equivalent of
their FOMC.
They both said the same thing, “We don’t know what we’re
doing. This is a massive experiment. We’ve never done this be-
fore. We try something. If it works, maybe we do a little more;
if it doesn’t work, we pull it away, and we’ll try something else.”
The evidence of this — besides hearing as much firsthand —
is that there have been fifteen separate Federal Reserve policies
in the last five years.
If you think about it, they started with forward guidance,
which was, “We will keep rates low for an extended period of
time.”
Then they said, “Oh, extended means all the way to 2013.”
Then they said, “All the way to 2014.”
Then they said, “All the way to 2015,”.
Then, “Wait a second. The dates don’t work. Let’s use some
numeric concepts.”
That’s when they started nominal GDP targeting. They
changed their tune to, “We have this threshold of 2.5 percent
inflation, not based on actual inflation, but based on projected
inflation, as projected by the Fed”. Essentially, that meant it could
be whatever they wanted it to be. They also set a target of 6.5 per-
cent unemployment, but when they got down to that level, they
said, “Oh, just kidding. We’re not going to apply that.”
They’ve had currency wars. They’ve had Operation Twist.
Not to mention QE1, QE2, QE3 — except QE3 came in two
flavors, $45 billion a month and $85 billion a month.
And now they’ve tapered. But the taper isn’t the first taper
because at the end of QE1 they tapered one hundred percent
and at the end of QE2 they tapered one hundred percent. We
have two data points to say tapering doesn’t work. I expect this
will fail as well.