Tim Duy Tries to Understand Dallas Fed President Richard Fisher
I don't think he succeeds. Richard Fisher:
Richard Fisher: Before every FOMC meeting, I survey a select group of 30 or so private business and banking operators, imparting no information about monetary policy but listening carefully to their perspectives on developments in the economy as seen at the ground level. For weeks leading up to the meeting, there was speculation in the financial markets and in the press that an Operation Twist was being contemplated. I received an earful of opinions on these rumors.
What I gleaned from those conversations was as follows:
Embarking on an Operation Twist would provide an even greater incentive for the average citizen with savings to further hoard those savings for fear that the FOMC would be signaling the economy is in worse shape than they thought…
But I don't understand Fisher either. I can't understand how this argument with which Fisher leads has weight.
Mind you, I do not think that this is the argument that persuades Fisher. The argument that seems to have the most weight with Fisher is:
Richard Fisher: One other factor gave me pause and that was, and remains, the moral hazard of being too accommodative. For years, I have been arguing that monetary policy cannot solve the problem of substandard economic performance unless it is complemented by fiscal policy and regulatory reform that encourages the private sector to put to work the affordable and abundant liquidity we are able to create as the nation’s monetary authority….
Paul Volcker, who has the scars on his back from his Herculean effort to rein in inflation in the 1980s, wrote of this in the New York Times on Sept. 18. He reminded us that once unleashed, inflation combines with stagnation to make stagflation, the most painful of all combinations for the poor, for workers, for job seekers, for bond and stock holders and for businesses trying to navigate the economy.
And as Tim Duy concludes:
Ultimately, for all his antics, this is what Fisher is about - hard money…. [H]e sees nothing but economic apocalypse in 3% inflation. He cannot wrap his mind around one simple fact – the 1970s began with 2.5% unemployment. We are currently facing unemployment above 9%. Apples and oranges…. For him, policy begins and ends with a single idea: Hard money is just morally good. And he will base policy on any "opinions on these rumors" that sound like they support his ideological conviction…
