Who Invited Him?

14 Jan

The reasonableness and straightforwardness of comments by Fed Governor Richard Fisher makes one wonder: Who Invited this guy to the Party? Mr. Fisher, in a speech much similar to one given several weeks ago, continued to question the sanity of providing additional liquidity to a market that clearly does not need it. One has to wonder whether Mr. Fisher is even on the same team as other Fed officials when he states ” Of greatest concern to me is that the risk of scrutiny and criticism might hinder policymakers from acting quickly enough to remove or dampen the dry inflationary tinder that is inherent in the massive, but currently fallow, monetary base”. Compare this with other Fed Governors who have made numerous calls to tie further Treasury purchases to some minimum level of inflation. We have to believe that mentality of the group advocating higher inflation has been driven to such conclusions by their perception that each new iteration of QE deals with the micro rather than the macro. These Fed officials know we are not dealing with bazookas anymore like we were in 2008/2009, but instead most at the Fed believe we are simply working around the edges of a precise, targeted balance sheet management program, which can be reversed at any time. This would all be wonderful if this thinking even came close to resembling the reality of Fed policy transmission. As we have stated before, Fed policy even under the most normal of circumstances, works with a most undefined lag. Governor Fisher understands this, the others understand this as well but have chosen to ignore it(For Now). There is no new Central Bank Paradigm: Buy Stuff.

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