The stance of monetary policy can&#x27;t be assessed by looking at the level of interest rate (or the amount QE) -- otherwise you&#x27;d conclude that inflationary basket case Argentina has much tighter monetary policy than deflationary basket case Eurozone.<p>I&#x27;m not inventing this, this is from Milton Friedman.<p>You judge monetary policy by its result: where are the variables you are targeting vs your targets?<p>The Fed&#x27;s target is &quot;low inflation and full employment&quot;. Since over the past decade we&#x27;ve had very little inflation and high unemployment, we can conclude that Fed monetary policy was tight.<p>You might blame the less-than-specific target that the policy makers have chosen for this and you&#x27;d be right, it&#x27;s way too vague and not that useful.<p>A much better target would be the level of average nominal wage per capita, or highly related but simpler: level of nominal GDP.<p>Based on these targets, monetary policy has been very tight over the past few years, particularly in the Eurozone.<p>Monetary policy is neutral if nominal GDP remains on a 5%&#x2F;year growth path. Big drops in NGDP is basically equivalent to the central bank punching the economy in the stomach.