Five years ago, the economy was in trouble. We decided that the best way for the economy was for us to buy all this mortgage stuff that other people didn’t want to buy. And those falling prices were hurting banks by making them see notional losses, who we absolutely HAD to protect, because otherwise who would lend to deserving businesses?
So we decided to print dollars and buy these securities, or, as they were called at the time, insecurities.
At first, it felt good. A few months down the line we were patting ourselves on each other’s backs (largely because it’s very difficult to pat your own, and man we’ve tried). And then when we did what we said we’d buy, something very strange happened.
No one else was buying.
No one was lending to deserving business either, but we had saved some banks.
So we decided to stimulate the economy one more time. And buy even more securities. And print even more money. Some $600 billion. This was a 10x higher dose, and it stimulated us, all right. We don’t know about the economy, and at this point, we didn’t really care. It was the stimulus, the stimulus, the stimulus.
And no one wanted to really lend to deserving business, but were doing some of it grudgingly.
Then in 2012 we had to have a bigger fix. $40 billion a month. Till kingdom come.
By December, even that seemed too little. $85 billion a month. For the foreseeable future, which in our stimulated state was approximately 10 minutes, with a bathroom break.
Japan joined in, printing $75 billion a month. Europe was both stimulated and constricted, we don’t really know.
Deserving businesses got money, finally. Because there was so much of it, that even if they got scraps they’d make it through. Emerging markets got some too, and the party was on.
Then something told us we had to stop. We didn’t want to, but third world countries were getting disgusted with us, and that’s just not done. So we decided to mention what would make us stop, like some random unemployment rate, or some other figure or whatever. And not “stop” but just reduce, by a marginal amount, what we would buy. We didn’t think we’d actually get there in years, much after my term was over, but we said “by next year”, just to tell those third-worlders we had this shit under control.
But obviously we didn’t. Money exited emerging markets so fast they were more like retreating markets. The Rupaiah, the Real, the Rupee and any currency that wasn’t actually doing insane levels of quantitative easing died and went 20% down. Our own 10 year bond – the darn traitors – went to 3% yields, from below 2%. They all hated me, and I was really Likeable Ben.
I don’t get it. I stimulated everyone, and they seemed stimulated, and I thought I’ll turn off the tap “just a little bit”, and then I’m blamed for world carnage? Do I deserve this right at the end of my illustrious career at the Fed?
I needed to get back to printing $85 billion a month, without the fear of a “taper”.
Complicating matters was that the data was getting better and better for America. We were seeing jobs. Prices were up, but we were manipulating inflation by separating it into “core” and “stuff that actually goes up”. Unemployment was down. Syria was behaving.
While American markets were up, even they realized that the taper would end the liquidity game, a dangerous one we’ve been playing since 2001, and that really isn’t my fault (though I turned it up several notches and then some).
So I shifted the goalposts. I said we needed considerably lower than 6.5% unemployment, and then also that I could change my mind later as well. I said we wouldn’t taper. I can’t taper. I can’t get myself to take the blame for even a single crash in a tiny market anywhere in the world, in the off chance it would impact America. It can be solved by printing money, you idiots! Look, see, how I did it! Here, if you don’t do it, I will. So I’m printing.
I’m going to print now not because we need it as an economy, but because other people need it and we need them. I’ve gone from Quantitative Easing to Quantitative Wheezing. It may be laboured but we’ll do it.
I’ll give us a $85 billion fix every single month, until I pass this whole steaming, stinking mess to someone else not named Larry Summers, good for him.
My name is Ben, and I’m a central banker. Help.