Dallas Fed's Fisher Would Like The Easy Money Whores To Settle Down a Little
If only IF ONLY Dallas Fed President Richard Fisher (JDA's #1 Fedhead) and his fellow hawks can stave off the easy money whores just a few months longer until he and Philadelphia Fed's Plosser get a vote next year we may actually have a chance. Of course with Queen Easy Money Whore Janet Yellen now officially riding bitch in Bernanke's helicopter as Fed vice chair, the odds aren't good for us. Sigh.
To sum up his thoughts for those of you with a 3 second attention span: jobs aren't coming back any time soon and easy money isn't going to make them come back any faster. The man gives me chills to read, I'm telling you. I think he missed his calling, he should be out here on our side with a "The End is Extremely Fucking Nigh" sandwich board picketing the Board of Governors and writing manifestos about the fallacy of fiat. Oh well. I don't hold the fact that he is a Dirty Fed operative against him.
Check out Fisher's To Ease or Not to Ease? What Next for the Fed? to the Economic Club of Minnesota:
In the summation of the recent Federal Open Market Committee (FOMC) meeting, released after we concluded our deliberations, it was crisply noted that “employers remain reluctant to add to payrolls.” At the same time, the Committee reported it saw no prospect on the foreseeable horizon for inflation―the bête noire of all central bankers―to raise its ugly head; neither was the bête rouge of deflation highlighted. Instead, in more convoluted syntax, the majority view of the Committee was summarized as follows: “Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.” The statement concluded by saying that the FOMC was “prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.”
I am afraid that despite recent speculation in the press and among market pundits, we did little at that meeting to settle the debate as to whether the Committee might actually engage in further monetary accommodation, or what has become known in the parlance of Wall Street as “QE2,” a second round of quantitative easing. It would be marked by an expansion of our balance sheet beyond its current footings of $2.3 trillion through the purchase of additional Treasuries or other securities. To be sure, some in the marketplace―including those with the most to gain financially―read the tea leaves of the statement as indicating a bias toward further asset purchases, executed either in small increments or in a “shock-and-awe” format entailing large buy-ins, leaving open only the question of when.
Since the FOMC meeting, a handful of my colleagues have fanned further speculation about QE2 by signaling their personal positions on the matter quite openly in recent speeches and interviews in the major newspapers. Hence the headline in yesterday’s Wall Street Journal, “Central Banks Open Spigot,” a declaration that surely gave the ghosts of central bankers past the shivers and sent a tingle down the spine of gold bugs from Bemidji to Beijing.
[M]y soundings among those who actually do the work of creating sustainable jobs and making productive capital investments―private businesses big and small―indicate that few are willing to commit to expanding U.S. payrolls or to undertaking significant commitments to expand capital expenditures in the U.S. other than in areas that enhance productivity of the current workforce. Without exception, all the business leaders I interview cite nonmonetary factors―fiscal policy and regulatory constraints or, worse, uncertainty going forward―and better opportunities for earning a return on investment elsewhere as inhibiting their willingness to commit to expansion in the U.S. As the CEO of one medium-sized business put it to me shortly before the last FOMC, “Part of it is uncertainty: We just don’t know what the new regulations [sic] like health care are going to cost and what the new rules will be. Part of it is certainty: We know that taxes are eventually going to have to increase to get us out of the fiscal hole Republicans and Democrats alike have dug for us, and we know that regulatory intervention will be getting more intense.” Small wonder that most business leaders I survey, including small businesses, remain fixated on driving productivity and lowering costs, budgeting to “get less people to wear more hats.” Tax and regulatory uncertainty―combined with a now well-inculcated culture of driving all resources, including labor, to their most productive use at least cost―does not bode well for a rapid diminution of unemployment and the concomitant expansion of demand.
So, it is indeed true that some economic theories would lead one to believe we can shake job creation from the trees if we were to further expand our balance sheet. Yet, to paraphrase the early 20th century progressive, Clarence Day―the once ubiquitous contributor to my favorite magazine, The New Yorker, and author of one of my all-time favorite films, Life with Father―“Too many (theorists) begin with a dislike of reality.” The reality of fiscal and regulatory policy inhibiting the transmission mechanism of monetary policy is most definitely present and is vexing to monetary policy makers. It is indisputably a significant factor holding back the economic recovery.
Yes he's said that before (and before that) but that's because no one is listening to what he is trying to explain. It's obvious to anyone with half a brain that you can throw all the blips you'd like at the problem but it won't get any better until there is some level of certainty for small business and employers. And no, we aren't talking about certainty when it comes to the economic outlook, we're talking about a complete regulatory unknown looming on the horizon and constantly bitchslapping the purely American desire to move forward, move on and thrive.
We have a long way to go.
And finally he closes with yet one more reminder that the Fed is no one's bitch and should not bend to the whims of whichever agency needs a printing press to hook it up. Amen and hallelujah to that, homie.
My reaction to reading that article was that it raises the specter of competitive quantitative easing. Such a race would be something of a one-off from competitive devaluation of currencies, a beggar-thy-neighbor phenomenon that always ends in tears. It implies that central banks should carry the load for stymied fiscal authorities―or worse, give in to them―rather than stick within their traditional monetary mandates and let legislative authorities deal with the fiscal mess they have created. It infers that lurking out in the future is a slippery slope of quantitative easing reaching beyond just buying government bonds (and in our case, mortgage-backed securities). It is one thing to stabilize the commercial paper market in a systematic way. Going beyond investment-grade paper, however, opens the door to pressure on a central bank to back financial instruments benefiting specific economic sectors. This inevitably leads to irritation or lobbying for similar treatment from economic sectors not blessed by similar monetary largess.
Like that whole thing about Fed independence? If it ever existed it certainly doesn't stand a chance now, especially with easy money whores barking every chance they get about asset purchases, higher inflation and staving off the spectre of deflation that haunts them in their sleep. Fisher ain't buying it and that, my friends, is what makes him my #1. If only his view were contagious or, I don't know, he could somehow slap the shit out of everyone else at that FOMC table and get them to get it once and for all.
I won't be holding out for that day, same as I didn't hold out for Richmond Fed's Lacker to take me up on my offer to slap the shit out of Janet Yellen in exchange for a couple thousand FRNs.