meaningful forward guidance along more amorphous lines is challenging. “ we ’ ll see ” : [UNK] 石 [UNK] [UNK] 河 the point is : forward guidance can be a complicated monetary policy tool. i had an interesting discussion about this two weeks ago with a couple of the members of the bank of england ’ s monetary policy committee ( mpc ). they noted that chris giles of the financial times has devoted a substantial amount of thoughtful attention to the discussion of forward guidance. in giles ’ money supply blog post of oct. 2, 2013, he wrote : “ forget triggers, thresholds, knockouts and long lists of conditions. paul fisher, the bank of england ’ s head of markets, says everyone is wrong to think forward guidance is complicated. the policy was summarized in a single simple sentence of the [ bank of england ’ s ] explanatory document, he said in a speech today. this is the sentence, ” and i ’ m quoting giles quoting paul fisher : “ in essence, the mpc judges that, until the margin of slack within the economy has narrowed significantly, it will be appropriate to maintain the current exceptionally stimulative stance of monetary policy, provided that such an approach remains consistent with its primary objective of price stability and does not endanger financial stability. ” to a central banker, that may have seemed about as concise a delphic statement as possible. but giles suggested, “ i ’ m sure we can all do better than that. ” he took a stab at translating the sentence himself, suggesting that it meant “ the mpc will let the recovery run for as long as it can, ” but he invited others who might have “ better, more elegant and more accurate translations ” to submit them via social media. later that day, he announced the best summation received. forward guidance expressed in a two - word sentence : “ we ’ ll see. ” 6 that about sums it up. the fomc is seeking to make sure that we have a sustained recovery without giving rise to inflation or market instability. we will conduct monetary policy accordingly. regardless of the way we may finally agree at the fomc to write it out or have chair yellen explain it at a press conference, we really cannot say more than that. from churchill by himself : the definitive collection of quotations, edited by richard langworth, philadelphia : perseus books group, 2008, p. 17. langworth cites churchill from march 15, 1926. “ forward

spread between the u. s. and the german sovereign yields is slightly narrower than it was at the end of third quarter 2014, but it remains historically large and attractive for investors. 2 hold that thought. now, if you read page c3 of today ’ s wall street journal, specifically the article titled “ watchdog warns of risks in markets ” about the risks of a repeat of the bond market turmoil of october and concerns about market stability as seen through the eyes of the office of the fomc ’ s “ policy normalization principles and plans ” released on sept. 17 is available at www. federalreserve. gov / newsevents / press / monetary / 20140917c. htm. over the past 15 years, the u. s. long rate has averaged about 40 basis points higher than the german long rate. since january 2013, the yield spread has widened by 110 basis points to about 1. 50 percent. over the same period, german 10 - year inflation expectations have dropped from 1. 9 percent to 1. 0 percent, or 90 basis points. u. s. 10 - year cpi inflation expectations have dropped from 2. 3 percent to 2. 2 percent – just 10 basis points. so it is worth noting that the drop in german inflation expectations relative to u. s. expectations can account for most of the widening of the yield spread between these two sovereigns. for investors who measure performance in terms of nominal returns or returns against nominal indexes, however, the currently widened spread is relatively attractive. bis central bankers ’ speeches financial research ( a bureaucracy of some 225 people and growing, created by the doddfrank law ), you would have noted the following sentences : “ a reduction in securities that are available to lend against in financial markets – such as treasury bonds and asset - backed securities – also is fueling... volatility. the securitization markets have shrunk since the financial crisis and the federal reserve has further reduced the amount of available securities by snapping up trillions of dollars in bonds in recent years. ” let me repeat that last clause : the federal reserve has further reduced the amount of available securities by snapping up trillions of dollars in bonds in recent years. to be precise, $ 1. 7 trillion of treasuries and asset - backed securities were purchased under qe3, on top of the $ 2 trillion purchased under the previous rounds of quantitative easing. to be sure, we have