NY Fed's Dudley: Monetizing Debt? Us? Never!

Oh, William Dudley, what are we going to do with you?


New York Federal Reserve Bank President William Dudley said the Fed has the tools to prevent inflation from accelerating and doesn’t need to begin trimming its balance sheet.

“It’s a little bit premature to be so confident that you want to pull all these things back right now, because the economy still isn’t growing very fast and we do have a very high unemployment rate,” Dudley said today in an interview on CNBC.

Dudley’s comments are in contrast to those of two Fed district bank presidents, Jeffrey Lacker and James Bullard, who said the central bank may not need to buy the full $1.25 trillion in mortgage-backed securities that has been authorized by year-end. Richmond’s Lacker and Bullard, of St. Louis, spoke at separate events last week.

“Obviously, as financial conditions improve, as the economy does somewhat better, which seems to be the trajectory they’re on, it’s a legitimate point to consider what you want to do in terms of your purchase programs,” Dudley said today.

I covered Lacker's thoughts already and will get to Bullard's later. As for Dudley, I have a few obscenities reserved especially for his ilk.

The impact from the Treasury purchase program is “more ambiguous” because it’s much smaller, Dudley said. The effort was aimed at creating additional stimulus when the fed funds rate was already near zero, and was not an effort to “monetize” the U.S. national debt, he said.

The Fed’s lending programs have led to a large expansion in the reserves banks keep at the central bank. Dudley said those reserves can be drained from the system before leading to an increase in lending and worsening inflation.

“My view is we have tools to manage our balance sheet so we’re not going to have an inflation outcome, a bad inflation outcome,” Dudley said.

Blah blah blah blah. I would like to see Dudley do slightly better but see he must have the same speech writer as Zimbabwe Ben. Saying "inflation is not a concern" does not act as garlic to the monetary vampire but he'll keep trying anyway and we'll be here laughing at him when he does. Am I the only one who feels like we've heard this speech a bazillion times already?

Sadly, the joke is really on us. Or is it on China? Fuck it, who cares?

I'd insert a joke about the Fed pulling out prematurely but frankly I'm out of LOLZ on this and am instead overwhelmed with rage and frustration. There's nothing funny about chronic asshattery of this magnitude.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.