Dallas Fedhead Fisher: "We May Be Forceful, We May Be Gradual, Who Knows"

There's nothing like a good snap-back.

Dallas Federal Reserve Bank President Richard Fisher on Thursday said the United States should have a "good snap-back" from recession in the final months of 2009, but that future growth could be a "slow crawl."

"You could have a stout third-quarter (GDP) number," Fisher told reporters after a speech at the University of California in Santa Barbara.

"It's encouraging and helpful and hopeful that we have a good third quarter and fourth quarter. But what is the rate of growth after that? And how do we get back to creating jobs?"

Fisher said it was too early to guess at the timing or pace of interest rate moves once the Fed starts to reverse its extremely easy monetary policy -- one that has left benchmark rates near zero since December 2008.

"You have to feel it. You have to walk through a river feeling the stones underneath your feet," he said. "We have to be forceful, or we may have to be gradual. It depends on the circumstances."

Still, with price pressures tilted more towards deflation because of high unemployment and low capacity utilization in the United States economy, inflation should not be a problem for now, Fisher said.

The Fed is prepared to pull the trigger on a policy shift when the time is right, he added.

"If we conduct ourselves properly, I don't think that inflation becomes a significant risk."

Many Fed watchers expect no move in interest rates from the U.S. central bank until 2011, although derivatives traders are betting a rate hike to come in the first half of 2010.

Overall, the Fed's Eleventh District president gave a downbeat assessment, worrying about the sustainability of growth in the medium term.

"The gears are very slow in their rotation, but you might say they're beginning to mesh," said Fisher, who is not a voting member of the Federal Open Market Committee in 2009.


The Fedheads are out in droves running the Q3 World Tour. Am I the only one who gets an ominous chill down my spine when reading "We have to be forceful, or we may have to be gradual"? It feels a bit pornographic in the financial sense and perhaps that is just my Pavlovian response to this time of year. You'd have to be stupid to ignore the warning signs and not feel another autumn assrape coming on.

Post-Traumatic Slack Syndrome and the Economic Outlook (With Thanks to Finn Kydland, Dolly Parton and John Kenneth Galbraith) does make one appreciate a Fed president with a sense of humor I suppose.

Fisher recommends reading Memoirs of Extraordinary Popular Delusions which includes insight like:

"Amid events like these, which, humiliating though they be, partake largely of the ludicrous, others occurred of a more serious nature. Robberies in the streets were of daily occurrence, in consequence of the immense sums, in paper, which people carried about with them. Assassinations were also frequent. One case in particular fixed the attention of the whole of France, not only on account of the enormity of the offence, but of the rank and high connexions of the criminal."

Beyond that, I can't tell if I'm reading Financial Armageddon or a Fedhead speech.

There are limits to the costs that can reasonably be passed on to consumers without damaging top-line revenue performance. Thus, simultaneously, businesses worked like beavers to preserve their bottom lines by controlling the costs of goods and services they sold, shifting their management models and budgeting accordingly.

Then they experienced a traumatic shock. Demand imploded. The equity and fixed-income markets seized up. Bank credit evaporated. The growth of the global economy hit a wall. Whereas just over a year ago managers were coping with a pervasive scarcity of inputs and escalating prices, there is now an abundance of almost every input and output and no pricing power. There are too many ships at sea; too many rail cars; too many airplanes and trucks; too many homes; too many hotels and apartments and office buildings; too many retail stores and malls and convenience stores; too much oil, natural gas and corn; and, according to Wall Street Journal reports this week, even too much champagne and bottled water.[2]

And yes, thank you Lord, we have finally come to realize there are too many lawyers.

In almost every sector of the economy—save for nonelective medical services and a few basic commodities being hoarded by the Chinese—the CEOs I survey are struggling to cope with excess capacity and slack.
Long hard slog.

Might I also recommend this sweet Flickr set if you're craving more Fisher? Creepy.

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.