Fed Alumni on the Doomed Fed Exit Strategy
Stanford economist John Taylor, Carnegie Mellon econ professor (and Richmond Fed alum) Marvin Goodfriend, former Fed governor Larry Meyer and Johns Hopkins economist Laurence Ball are all due to head to The Hill tomorrow to warn the House Financial Services Committee that the Fed's proposed exit strategy (if one exits, that point is still up for debate) is doomed.
Or maybe just a little flawed.
Goodfriend feels the Fed should get real about this (alleged) exit strategy (or so he told Frank and Friends in February):
In order to improve the effectiveness of its exit strategy, and in keeping with the Fed’s longstanding intention to increase transparency, I believe that the Fed should recognize and describe the strategic initiatives that it undertook in the credit turmoil in terms of three fundamental components: monetary policy, credit policy, and interest on reserves policy.
Wait a minute, sounds like he wants the Fed to get real with everyone else above itself. Effectiveness is a funny word when you're talking about the uncharted territory the Fed is stalking at this very moment. Sure the waters are calm now but what happens when Janet Yellen is implanted where Don Kohn used to be and the bond vigilantes keep shoving 12" spiked dildos up Tim Geithner's ass at every auction?
Can you blame them? I'd prefer to grab 15" and shove myself but I'd rather invest in toxic assets than touch anything the Treasury is selling.