the force is strong
active army garrisons and such activated
the future will be full of learning
in the mean time, learning just in in-tray, from hk, to enlighten me in germany
NOTES FROM RICHARD FISHER SPEECH – HONG KONG – 14 APRIL 2009
Richard W. Fisher is the President of the Dallas Federal Reserve Bank. He is not currently a voting member of the FOMC (he was in 2008). He became President of the Dallas Fed in 2005. He is known as the “most hawkish” member of the 12 Federal Reserve Banks and has voted most consistently hawkish when the Dallas Fed has an FOMC vote (every 3rd year).
My view: If he had been running the Fed for the past decade rather than Greenspan, the US might still be in trouble, but not nearly to the degree that it is in today. Advocate of the “Taylor Rule” and Professor John B. Taylor is on his research board.
NOTES:
In 2007, 30% of all US jobs were created in his District.
In 2008, his district was the only one that created net new jobs.
He thinks that unemployment hits 10% by year end.
As of today, the Fed has purchased $48 Billion of the $300 Billion in US Treasuries that it has announced that it intends to purchase.
CPI to be released this week will be “zero or close to it.” I’m guessing he is thinking CPI will come in at around 0.1%.
“TAYLOR’S RULE”
Taylor's rule suggests that the Fed increases interest rates in times of high inflation, or when employment is above the full employment levels, and decreases interest rates in the opposite situations.
Without blaming Greenspan, he is an advocate of Taylor’s Rule. He said “what is past is past and we need to look forward.”
He noted that given today’s economic situation, Taylor’s Rule would advocate interest rates being at -6% currently. Since rates cannot be negative, that is why the Fed has taken such “unprecedented actions.”
Fisher’s views of inflation are:
“Inflation is evil”
“Inflation is the primary driver of uneconomic decisions by businesses because during inflationary periods, businesses are focused on accounting issues rather than growing business.”
“Inflation is not a current threat due to high unemployment, excess capacity, etc.”
WHAT SIGNS DO WE NEED TO SEE THAT THE FED IS BEING SUCCESSFUL?
– Housing Price Stability
– Retail Sales growth
– General Return of Confidence
– He speaks with 30-35 CEO’s before each FOMC meeting to gauge current conditions and sentiment. At present, CEO’s are budgeting for only things that are absolutely necessary and no more.
WHAT WORRIES HIM MOST THAT ISN’T FACTORED IN?
Acknowledged that he cannot discuss most issues given his prominent position.
However, he thinks that future unfunded liabilities (Social Security & Medicare) are one of the keys.
Notes that unfunded liabilities for Social Security are currently $13 Trillion.
“easily solvable if we have the political will (implying the US doesn’t have it).
Notes that unfunded Medicare liabilities are currently approximately US$80 Trillion.
“My staffers have zero confidence that they will see a single dime from these institutions by the time that they retire and are saving accordingly.”
“The Government will ask us (the Fed) to monetize these liabilities and we won’t do it.”
(nice to hear, and I hope it is true, but I have my doubts).
The US has overleveraged ourselves and that US consumers will “overshoot” in the other direction and save too much at some stage in the near future.
US – CHINA
Relationship is symbiotic. We need China and China needs us.
Has been to Tokyo and Singapore and after Hong Kong is off to Beijing and Seoul.
(damage control I think).
Fisher started talk with this quote, which he started without acknowledging the person or the time period. He noted author and period afterwards. He was making the point that cycles always have and always will be with us.
Full Washington Irving missive found here:
american_almanac.tripod.com
Washington Irving on the Mississippi Bubble of 1719:
I have since been occasionally reminded of this scene, by those calm sunny seasons in the commercial world, which are known by the name of ``times of unexampled prosperity.'' They are the sure weather-breeders of traffic. Every now and then the world is visited by one of these delusive seasons, when ``the credit system'' as it is called, expands to full luxuriance; everybody trusts everybody; a bad debt is a thing unheard of; the broad way to certain and sudden wealth lies plain and open; and men are tempted to dash forward boldly, from the facility of borrowing.
Promissory notes interchanged between scheming individuals, are liberally discounted at the banks, which become so many mints to coin words into cash; and as the supply of words is inexhaustible, it may readily be supposed what a vast amount of promissory capital is soon in circulation. Every one now talks in thousands; nothing is heard but gigantic operations in trade; great purchases and sales of real property, and immense sums made at every transfer. All, to be sure, as yet exists in promise; but the believer in promises calculates the aggregate as solid capital, and falls back in amazement at the amount of public wealth, the ``unexampled state of public prosperity!''
Now is the time for speculative and dreaming or designing men. They relate their dreams and projects to the ignorant and credulous, dazzle them with golden visions, and set them maddening after shadows. The example of one stimulates another; speculation rises on speculation; bubble rises on bubble; every one helps with his breath to swell the windy superstructure, and admires and wonders at the magnitude of the inflation he has contributed to produce.
Speculation is the romance of trade, and casts contempt upon all its sober realities. It renders the stock-jobber a magician, and the exchange a region of enchantment. It elevates the merchant into a kind of knight-errant, or rather a commercial Quixote. The slow but sure gains of snug percentage become despicable in his eyes: no ``operation'' is thought worthy of attention that does not double or treble the investment. As he sits musing over his ledger, with pen behind his ear, he is like La Mancha's hero in his study, dreaming over his books of chivalry. His dusty counting house fades before his eyes, or changes into a Spanish mine; he gropes after diamonds, or dives after pearls. The subterranean garden of Aladdin is nothing to the realms of wealth that break upon his imagination.
Could this delusion always last, the life of a merchant would indeed be a golden dream; but it is as short as it is brilliant. Let but a doubt enter, and the ``season of unexampled prosperity'' is at an end. The coinage of words is suddenly curtailed; the promissory capital begins to vanish into smoke; a panic succeeds, and the whole superstructure, built upon credit, and reared by speculation, crumbles to the ground, leaving scarce a wreck behind:
When a man of business therefore, hears on every side rumors of fortunes suddenly acquired; when he finds banks liberal, and brokers busy; when he sees adventurers flush of paper capital, and full of scheme and enterprise; when her perceives a greater disposition to buy than to sell; when trade overflows its accustomed channels, and deluges the country; when he hears of new regions of commercial adventure; of distant marts and distant mines, swallowing merchandise and disgorging gold; when he finds joint stock companies of all kinds forming; railroads, canals, and locomotive engines, springing up on every side; when idlers suddenly become men of business, and dash into the game of commerce as they would into the hazards of the faro-table; when he beholds the streets glittering with new equipages, palaces conjured up by the magic of speculation, tradesmen flushed with sudden success, and vying with each other in ostentatious expense; in a word, when he hears the whole community joining in the theme of ``unexampled prosperity,'' let him look upon the whole as a ``weather-breeder,'' and prepare for the impending storm.
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