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Selections from Richard Fisher's Recent Speech Following QE3+
Richard Fisher is the Dallas Fed President and is an outspoken dissident against the easy money policies of Bernanke and the current majority of the FOMC committee. In this recent speech, Fisher argues that we tread a very dangerous path with the latest round of quantitative easing--especially in conjunction with a dysfunctional congress and growing economic uncertainty. I have included below some of his most stirring comments [emphases throughout are entirely mine] as well as a link to his entire speech. 

The Recent FOMC Meeting
"It will come as no surprise to those who know me that I did not argue in favor of additional monetary accommodation during our meetings last week. I have repeatedly made it clear, in internal FOMC deliberations and in public speeches, that I believe that with each program we undertake to venture further in that direction, we are sailing deeper into uncharted waters. We are blessed at the Fed with sophisticated econometric models and superb analysts. We can easily conjure up plausible theories as to what we will do when it comes to our next tack or eventually reversing course. The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy. Nobody really knows what will work to get the economy back on course. And nobody--in fact, no central bank anywhere on the planet--has the experience of successfully navigating a return home from the place in which we now find ourselves. No central bank--not, at least, the Federal Reserve--has ever been on this cruise before."


"Certain theories and various hypothetical studies and models tell us that flooding the markets with copious amounts of cheap, plentiful liquidity will lift final demand, both through the "wealth effect” channel and by directly stimulating businesses to expand and hire. And yet from the perspective of my watch station--as I have reported time and again--the very people we wish to stoke consumption and final demand by creating jobs and expanding business fixed investment are not responding to our policy initiatives as well as theory might suggest."

"Surveys of small and medium-size businesses, the wellsprings of job creation, are telling us that nine out of 10 of those businesses are either not interested in borrowing or have no problem accessing cheap financing if they want it. The National Federation of Independent Business (NFIB), for example, makes clear that monetary policy is not on its members' radar screen of concerns, except that it raises fear among some of future inflationary consequences; the principal concern of the randomly sampled small businesses surveyed by the NFIB is with regulatory and fiscal uncertainty. This is not terribly difficult to understand: If you are a small business, especially, and not only if you operate as an S corporation or as a limited liability company, you are stymied by not knowing what your tax rate will be in future years, or how you should cost out the social overhead of your employees or how you should budget for the proliferation of regulations flowing from Washington."


"With the disaster that our nation's fiscal policy has become and with uncertainty prevailing over the economic condition of both Europe and China and the prospects for final demand growth here at home, it is no small wonder that businesses are at sixes and sevens [British idiom describing a state of confusion or disarray] in committing to expansion of the kind we need to propel job creation."

[For what it is worth and as just another small business owner, I agree wholeheartedly with this sentiment. Despite our own internal growth, which has been rapid and healthy indeed, the level of uncertainty caused by the regulatory environment, tax, and employment costs (healthcare) make additional hiring a very difficult matter.]


Our Dysfunctional Congress and Drunken Sailors
"I would point out to those who reacted with some invective to the committee's decision, especially those from political corners, that it was the Congress that gave the Fed its dual mandate. That very same Congress is doing nothing to motivate business to expand and put people back to work. Our operating charter calls for us to conduct policy aimed at achieving full employment in addition to preserving price stability. A future Congress might restrict us to a single mandate--like other central banks in the world operate under--focused solely on price stability. But unless or until that is done, we have to deliver on what the American people, as conveyed by their elected representatives, expect of us.

"One of the most important lessons learned during the economic recovery is that there is a limit to what monetary policy alone can achieve. The responsibility for stimulating economic growth must be shared with fiscal policy. Ironically, and sadly, Congress is doing nothing to incent job creators to use the copious liquidity the Federal Reserve has provided. Indeed, it is doing everything to discourage job creation. Small wonder that the respondents to my own inquires and the NFIB and Duke University surveys are in "stall" or "Velcro" mode."

"The FOMC is doing everything it can to encourage the U.S. economy to steam forward. When we meet, we consider views that range from the most cautious perspectives on policy, such as my own, to the more accommodative recommendations of the well-known "doves” on the committee. We debate our different perspectives in the best tradition of civil discourse. Then, having vetted all points of view, we make a decision and act. If only the fiscal authorities could do the same! Instead, they fight, bicker and do nothing but sail about aimlessly, debauching the nation's income statement and balance sheet with spending programs they never figure out how to finance."

"I am tempted to draw upon the hackneyed comparison that likens our dissolute Congress to drunken sailors. But patriots among you might take umbrage, noting that a comparison with Congress in this case might be deemed an insult to drunken sailors."

Written By: Joshua Ungerecht

Dual Mandate, Employment, Fed, Federal Reserve, Fiscal Policy, FOMC, Job Creation, QE3, Quantitative Easing, Recommended Reading, Small Business