Yesterday, Fisher stepped to the podium again. Here, his purpose was to explain and clarify why he dissented on Operation Twist. Unfortunately, he is hampered a bit by respecting the yet to be disclosed minutes of the meeting. Perhaps he will re-visit the topic more fully after the minutes are released. He did begin yesterday’s speech with a really terrific analogy. As he started, a large photo was shown of a sign outside the Jan Mayen Arctic Weather Station. As the picture loomed above, Fisher explained as follows:Jan Mayen is a desolate volcanic island located about 600 miles west of Norway’s North Cape. It is the home of a meteorological and communications station manned in the harshest of winters by 17 hearty members of the Norwegian Armed Forces. If you read Tom Clancy’s Hunt for Red October, you would know it as “Loran-C,” a NATO tracking and transmissions station. In the video game Tomb Raider: Underworld, Lara Croft visits Jan Mayen in search of Thor’s Hammer, considered the most awesome of weapons in Norse mythology, capable of leveling mountains and performing the most heroic feats. My brother Mike recently visited this station on Jan Mayen. This is the sign that greeted him. In norsk, it reads as follows:
- “Theory is when you understand everything, but nothing works.”
- “Practice is when everything works, but nobody understands why.”
- “At this station, theory and practice are united, so nothing works and nobody understands why.”My wry brother implied that this about summed it up for monetary policy. Drawing on theory and practice, the 17 members of the Federal Open Market Committee (FOMC) have been working in the harshest economic environment to harness monetary theory and lessons learned from practice to revive the economy and job creation without forsaking our commitment to maintaining price stability. But the committee’s policy has yet toshow evidence of working and nobody seems to quite understand why.Let’s repeat that last sentence one more time for emphasis. “But the committee’s policy has yet to show evidence of working and nobody seems to quite understand why.” That makes the frustration in the FOMC (and elsewhere in the government) fully palpable. It suggests that “we’re doing what the book says to do” but not getting the results the book suggested.
That's not reassuring. It's possible that we have a delusional President living a fantasy life and a Federal Reserve headed by the man who's reputed to know what went wrong during the Great Depression and how to prevent it from happening again. He's reading from the book ... and it's not working.
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