Dallas Fed's Fisher: The Fed Isn't Here To Fix The Economy
Damn right they aren't here to fix the economy and it's about time someone recognize that. If it were up to me they wouldn't exist at all except to process checks and other payments and serve as National Bank of the United States so the government has a checking account to draw from (opted out of overdraft protection, of course, since we all know they've bounced about $1 trillion worth of checks of late).
Thankfully my favorite Fedhead Richard Fisher is here to remind us all of the Fed's precarious position and, more importantly, function in this bizarre economic environment of ours. Forgive the TLDR and read it any damn way.
Check out "Monetary Policy Going Forward", remarks today to the Greater Houston Partnership:
With the efficacy of most financial markets reasonably restored and inflation subdued, the question then is how the Federal Reserve might best do its part to restore employment growth.
Here’s the rub. Note that I say, “Do its part.” The Fed is not the end-all for curing every economic pathology. To return to my naval analogy, we are not the only authority in the pilot house. We play a crucial role in conditioning the economy, but we do not play the only role. Fiscal and regulatory authorities share significant responsibility for incentivizing economic behavior through taxes, spending and rulemaking.
With this in mind, I have been outspoken about what I refer to as “random refereeing,” by which I mean the tendency for lawmakers and rule makers to create programs that hinder, rather than advance, the incentive for the private sector to expand its payrolls. I spoke of this recently in San Antonio, noting that among the CEOs I regularly survey before every FOMC meeting―leaders of companies nationwide that vary in size from nine employees to over a million and represent a broad cross section of goods and service companies―the prevailing sentiment is that politicians and officials who craft and enforce taxes and rules have been doing so in a capricious manner that makes long-term planning, including expanding payrolls, difficult, if not impossible.
Just last week, I sat in on a financial planning and budgeting discussion with middle managers of one of America’s leading consumer goods producers. Asked directly how they determine the all-in cost of an employee, the CFO replied, “We can’t. We can’t because we don’t know what will happen on the tax front or with social overhead.” So their current plan is to withhold payroll expansion in the United States while investing their growing cash reserves in driving productivity enhancement from their current crop of over 200,000 employees, of which about 70,000 are located in the United States. Meanwhile, they are searching to expand their operations in other countries that “offer better incentives, stability and a more entrepreneurial environment.” The sentiment expressed by this CFO is not atypical. A careful reader of the minutes of the last FOMC meeting will note that several participants in the committee’s deliberations “reported that business contacts again indicated that uncertainty about future taxes, regulations, and health-care costs made them reluctant to expand their workforces. Instead, businesses had continued to meet growth in demand for their products largely through productivity gains and by increasing existing employees’ hours.” This does not bode well for job creation here at home.
The retarding effect of heightened uncertainty over the fiscal and regulatory direction of the country makes it difficult to kick-start the transmission mechanism of the economy. One might reasonably posit that the gas tank of those who have the capacity to hire―the private-sector businesses of America―is reasonably full. And one might conclude that the Fed, having cut the cost of interbank overnight lending to near zero and used quantitative easing to coax the entire yield curve downward, has driven the cost of gas to virtually nil for both the government and those businesses that are creditworthy.
The issue now is how that fuel might be released so as to propel the engine of job creation and drive a happier pace of economic growth.
As you recall, he's complained about this before and he's completely right. Businesses that could hire won't because we still don't know shit about the impact of Obamacare, nor are we convinced that the tax and regulatory burden of additional employees will be easy to handle. So until the government gets its head out of its ass and figures these things out in a way that does not leave businesses wondering
what they did to deserve such horrible treatment, unemployment will continue to surge and the unemployed will continue to suffer. Gee, what a novel concept eh?
Stop looking to the Fed to "fix" this, we are all so much better off when they stay the hell away from creative intervention that isn't in their mandate and stick to what they know: debasing the dollar and processing checks.
I remind dear reader that these views are my own and do not necessarily represent those of my Fedbashing colleagues and/or associates. Bitches.