With monetary policy makers of this caliber, no wonder things are getting worse!
In a recent speech, San Francisco Fed president John Williams pontificated:
San Francisco Federal Reserve President John Williams reiterated Monday his view that the U.S. economy is ready for higher interest rates, but flagged the risk of broad-based declines in asset prices as a result.
“It makes sense for us to be moving interest rates gradually back to more a normal level over the next couple years,” Williams said. “I actually think that’s a sign of strength for the global economy.”
Speaking at a panel on systemic risk at the Milken Institute Global Conference, Williams said the biggest systemic financial risk currently is the possibility that “broad sets of assets are going to see big movements downward” as interest rates rise. “That’s an area that I think is a potential risk.”
“What I worry a lot more about is when people forget about the financial crisis, when they forget about the terrible things that happened,” he said, suggesting that may not happen for another five or ten years.
Nothing he says makes sense. If the economy is “ready for higher interest rates”, why would that cause a “broad-based decline in asset prices”? Also, how could an increase in rates be a “sign of strength”, if the likely outcome is a “big downward movement in broad sets of assets”?
It just shows how stupid it is to have, no matter what, a “gradual normalization” strategy for monetary policy!
Historinhas 
For Fed members that feel compelled to “normalize”, they should start by “normalizing” IOR. It was 0% for 95 years. Make it 0% again (ie, stop giving money to banks for doing nothing). Then, after some time, the Fed might find itself in a position to sell down its balance sheet while maintaining a 5% NGDPLT. In fact, if they’d wait until NGDP was growing faster than 5% to start the sell down, they might be pleasantly surprised at how quickly they could normalize the balance sheet too.
Bill, they get paid NOT to think!