Jim Rickards author of Currency Wars, and another interesting book I recently read The Death of Money had this to say.
“Don’t ever think for a minute that the central bankers know what they’re doing,” “They don’t.”
“That’s my own view, but I’ve heard that recently from a couple central bankers. I recently spent some time with one member of the FOMC, the Federal Open Market Committee, and another member of the Monetary Policy Committee of the Bank of England, which is the equivalent of their FOMC, both policymakers, both central bankers.
“And they said the same thing, ‘We don’t know what we’re doing. This is a massive experiment. We’ve never done this before. We try something. If it works, maybe we do a little more; if it doesn’t work, we pull it away, and we try something else.’
“The evidence for this is the Fed has had 15 separate policies in the last five years. If you add it all up, all the forward guidance, all the dates, all the targets, the currency wars, Operation Twist, all the flavors of QE, 15 separate policies in five years, that tells you they don’t know what they’re doing. They’re making it up as they go along.”
The markets shot up on the latest comments from the FOMC as they released their statement post 2 days of meeting. While Rickards comments seem outrageous they are so obvious. If you speak to the greatest market strategists around the world you will hear lots of “if” statements. The reason is we don’t live in a world of certainty, rather we are forced to make reactionary decisions all the time as the circumstances change. Governments and Central Banks are no different.
So if you are George Soros, Bill Ackman, the Goldman Sachs market strategist or any other major player just like Janet Yellen you don’t know anything with certainty. It is therefore incumbent on us to treat the “Experts” with circumspection. Placing these mortals, with archetypal Saviour like qualities is precisely the reason we get herd behaviour from the media enhanced feedback loop, created by relying on psychologically comfortable attitudes. I will unpack this issue more fully in my book the Market Complex, save for now when you read headlines like the one below from reputable news services like Bloomberg, you need to beware how heavily the media tries to influence our way of thinking.
Draghi Will Win on Economic Stimulus – Dec 16, 2014