Posted on 10/07/2013 11:07:22 PM PDT by ziravan
I went to listen to Dallas Fed Reserve President Richard Fisher speak tonight on the Campus of SMU in Dallas sponsored by Texas Monthly.
There are a few observations I wanted to make:
1. Fisher states that the Fed has two legislated missions: monetary policies to maintain price stability, and policy to attain maximum employment.
Fisher says the latter is an impossible mission because the Fed can set the right conditions that would allow for full employment, but they cannot control the policy decisions that would allow for it. Three times he said this.
His example: the Fed is pumping gas, and the tank is full of high octane fuel. No matter how much more fuel the Fed puts in the car, it won't go where it needs to go until somebody steps on the gas.
2. Fisher says he believes there is no evidence that QE worked, or will work and that he routinely votes to taper it. He says he refers to the Fed meetings as "The Aviary" - full of either hawks or doves.
When specifically asked if a $4 trillion dollar balance sheet wasn't enough to be very concerned, at what level should we be concerned. He said $4 trillion is enough to be worried.
3. This to me is the most interesting, and it's the question I would have asked: If the gov't takes in $200 billion a month, and debt service is $20 billion then how can the gov't default after Oct 17? Won't it have enough to at least pay for debt service.
His answer: maybe the gov't could pay debt service, but probably not, and it wouldn't matter if they could. October is a weird month, typically one of the lowest for receipts, but where about 1/3rd of annual expenses are front loaded for the year, so, there might not be the direct funds to pay for debt servicing. Not that it matters. At that point, even if the gov't could pay for debt servicing, so many other bills would go unpaid (Medicare, SS, military, contracts etc.) that it would cause a cascade failure that would spook the markets, send interest rates through the roof and the resulting fallout would ensure a "black swan" event that would change the United States' position forever. At that point, even if the dollar retained status as reserve currency, the interest rates needed to borrow money would change our relationship to our current debt load to make it unsustainable sooner rather than later.
4. Mr. Fisher said several times that business leaders are taught to manage risk. The problem for the U.S. is too much spending and too little income ---- combined with no clear policy direction. He said that the former could be fixed by EITHER more taxes or less spending, and business could adapt to either (and always have). The more immediate problem is that business is blind to the risks it faces from the gov't in the form of regulation and policy. If the gov't would clear up the path, then business leaders could manage whatever risk is in the way - that's what they are trained to do.
5. He said that our primary and secondary schools are big problems. We have the top notch colleges in the nation, but our primary/secondary schools are failing us.
6. Texas - he said several times that Texas is on the right track because of little regulation and gov't. He said 140 days/ every other year was a great formula for gov't (2 days would be better). He says Texas drives the nation's jobs right now.
Complaints he hears often: "Texas is leading in low pay jobs" Answer "Texas is also leading in high pay jobs, it leads in low pay jobs because it leads in all paying jobs."
Complaint: "Texas provides too small a safety net for its citizens". Answer: "Then move to California or Illinois, it's not like there aren't other States with that option, IF that is what you want. Texans believes that if you're in need, you should work. And that works for Texas."
7. Mr. Fisher said that he normally focuses his attention on "The middle two quartiles" (i.e. the middle class.) The rich will be rich, and the poor will be poor, but the middle quartiles is where you can see the result of policy.
One other observation, he didn’t directly say this, but it came across fairly clear to me if it came to it, that Congress would be sat down (just like TARP) and told that if they don’t sign off on raising the debt limit, that the resulting surge in interest rates would cause a black swan event that would make 2008 look like a picnic.
Great post. All that comes out from this regime is lies, lies, and more lies. Osama inherited the worst economy ever from himself. Every day we say “What if Bush had said or did what these clowns say?” The press is pure evil, but they won’t figure it out until they and their children will have to pay for the mess they helped to create.
Thank you for reporting this to us. Interesting. I wouldn’t have had a clue otherwise.
“told that if they don’t sign off on raising the debt limit, that the resulting surge in interest rates would cause a black swan event that would make 2008 look like a picnic.”
With all of the training he talked about, don’t you think Fisher was trained to say that? Tarp was a failure... the Federal Reserve are all failures. Did you ask him how much the Fed had pumped into European banks? It is now in excess of 10 trillion dollars in grants and zero percent loans.
Default is coming... they just want to kick the can until it falls apart.
Atlas Shrugged seems closer then ever before. Who is John Galt?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.