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« Bernanke On 60 Minutes: "We're NOT Printing Money" | Main | Video - TARP CEOs strike it rich on taxpayers »

Fed President Richard Fisher: Even We Can't Print Enough Money "To Compete With The Enormous Flood Of Borrowing Coming From The United States Treasury"

Video - Interview with Dallas Fed President Richard Fisher

Considering Bernanke's statement last night that the Fed isn't printing money, we thought it would be interesting to revisit Fisher's comments on the matter.

Quotes inside.


Source - Bloomberg

The Federal Reserve isn’t capable of offsetting the “flood” of U.S. Treasury borrowing with its bond-purchase program, which is helping to revive credit markets, Dallas district-bank President Richard Fisher said.

  • “The program has had its impact,” Fisher said today in an interview with Bloomberg Television. “At the same time, you cannot counter this enormous flood” of borrowing “coming from the United States Treasury.”
  • The Fed won’t “monetize” the fiscal deficit by effectively printing money to finance the shortfall, and there’s been no “pressure” from the Obama administration to do so, said the Dallas bank chief.  Fisher, 60, also dismissed the concerns of some central bank watchers that its record purchases of assets will cause inflation to soar.
  • Policy makers are “constantly aware” of the need to consider an exit strategy from their unprecedented emergency initiatives during the crisis, and will end the programs at an appropriate time, he said. “We have to apply our judgment. There’s nothing that tells us how to do this.”

Fisher, who describes himself as among the most hawkish members of the Federal Open Market Committee on inflation risks, said it’s inappropriate to be a “screeching hawk” on price pressures now because of the amount of “slack” in the economy. He said he isn’t surprised by rising yields and reiterated his position that deflation, or an extended and broad decline in prices, is a greater risk than inflation.

“Long term, we all know inflation is a monetary problem, and you could have inflationary pressures,” he said. Still, “that is not the issue right now.”


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Reader Comments (21)

If you don't have a subscription the WSJ then just type the title in google and find it through google news. And you will be able to see the entire article.

GREELEY, Colo. -- Larry Seastrom, the founder of New Frontier Bank, made it a mantra to invest in his community. That paid off big time, both for the bank and for this fast-growing college town on the broad plains of northeast Colorado.

Founded a decade ago in a double-wide trailer, New Frontier hit $1 billion in assets in July of 2006 and, in a burst of growth, doubled to $2 billion in just 18 months.

Then, just as quickly, it collapsed.

Jun 16, 2009 at 7:20 PM | Registered CommenterDailyBail
This is the story of how the federal government essentially told a bank that it was paying too much money in interest to its customers and ordered it to lower the rates. It’s also about why that may not be such a bad thing, if only its logic applied equally to all banks.

Jun 16, 2009 at 7:22 PM | Registered CommenterDailyBail
Jun 16, 2009 at 7:27 PM | Registered CommenterDailyBail
Republican demands BofA-Countrywide loan emails


Bank of America (BAC.N) has a Wednesday deadline to disclose any special mortgage terms the bank's Countrywide Financial unit gave to politically influential customers over an eight-year period, a senior Republican said on Tuesday.
Jun 16, 2009 at 7:31 PM | Registered CommenterDailyBail
The White House on Tuesday dashed hopes that the federal government would help California overcome a mammoth budget crisis that has brought the state dangerously close to an economic meltdown, saying the state will have to solve the problem on its own.

"It's obviously not an easy time for the state of California," White House spokesman Robert Gibbs told a briefing when asked if the administration would provide emergency financing for the state.

"We'll continue to monitor the challenges that they have, but this budgetary problem unfortunately is one that they're going to have to solve," Gibbs said.


A steak dinner at Janko's little Zagreb in Bloomington says Obama will end up bailing out California to some degree. Politics, baby. It's an important state for Democrats.
Jun 16, 2009 at 7:33 PM | Registered CommenterDailyBail
President Barack Obama, warning Wall Street not to forget how it almost caused the financial system to collapse, said “sensible” new rules are needed to tighten oversight and restore confidence in U.S. markets.

“Wall Street seems to maybe have a shorter memory about how close we were to the abyss than I would have expected,” Obama said in an interview with Bloomberg Television today at the White House. “All we’re doing is cleaning up after the mess that was made.”

Jun 16, 2009 at 7:35 PM | Registered CommenterDailyBail
But then there's this little nugget.

The Obama administration’s revamp of U.S. banking and market regulations may be stalled into next year as Congress and the president set health-care reform and climate control as domestic priorities.

The ability of banks to repay U.S. aid and raise capital without government help may signal the economy is rebounding, easing pressure for sweeping change in financial rules. A delay this year may push the political debate into the 2010 congressional election campaign.

Jun 16, 2009 at 7:38 PM | Registered CommenterDailyBail
Jun 16, 2009 at 7:55 PM | Registered CommenterDailyBail
You folks who argue against hyper-inflation really don't get it. But you will in due course understand that all that has to happen for hyperinflation to take hold is the shunning of U.S. sovereign debt. That is all. And when the tax receipts fall even further
in the next round of economic contraction foreigners will see exactly what that means and they will not step up at auction. And please don't give me any of that crud about how a reserve currency can't experience a hyperinflation. It can and will, and we are fast losing that status in any event. You can't own enough non perishable food and silver.
Jun 16, 2009 at 8:04 PM | Unregistered Commenteredwardo

There is no need to get personal. We do actually "get it", we just don't necessarily agree.

Read this from today on the lack of inflation from Reuters:


Prophets of inflationary doom have long been clutching at statistical straws. It becomes clearer with each official release that inflation clouds are not even visible on the distant horizon. Inflation fear mongers seem motivated more by an ideological aversion to decisive government action - particularly the Federal Reserve’s ballooning balance sheet.

The spare capacity of US industry has now reached a 40-year high. Companies are churning out just 68.3 percent of their potential output. To put this in perspective, the average capacity utilization between 1972 and 2008 was 80.9 percent. In a data series stretching back to 1967 the figures have never been lower. Clearly American industry has huge amounts of slack to deploy when the recovery comes. With unemployment at 9.4 percent, companies will also have a huge pool of workers to draw upon before they start bidding up the price of labor. This will give policy makers plenty of time to withdraw their stimulus before inflation becomes a problem.

Nor are the money supply figures as alarming as inflation hawks have argued. Arthur Laffer’s piece in the Wall Street Journal - which is linked above - focused on the explosive growth of M1. The latest figures show M1 - mainly cash and checking accounts - up 16.2 percent over the year to May. Americans seem keen to keep plenty of cash on hand as the economy tanks. But broader money supply growth has been reassuringly sedate. M3 - which includes slightly less liquid assets such as time deposits - is growing at below 4 percent on a three-month annualized basis, according to Capital Economics. The velocity of circulation also appears to have slowed abruptly and bank lending has been edging lower.

We now have to wait and see how the consumer price index turns out tomorrow.
Jun 16, 2009 at 8:24 PM | Registered CommenterDailyBail
I'm sorry you though that was personal. But the response in the form of the article is exactly why I say you all don't get it. Of course there is no sign of inflation in the aggregates at present. There will be in time, and when it happens it will be sudden and severe, which may be an understatement.
Jun 16, 2009 at 9:32 PM | Unregistered Commenteredwardo
It will be an increase in commodity prices that will lead us out of the recession so all this talk of prolonged deflation is bad news for the length of this economic downturn.
Jun 16, 2009 at 9:36 PM | Unregistered Commentergobias bluth

I likely misread your meaning. It sounds like we actually agree somewhat. I believe inflation will eventually rear its head, but not hyper-inflation. Too many things working against it in my view. But, ultimately we are all jsut guessing. Who knows.

I'm sure the inflationists expected something out of Japan during the past 20 years of printing and easing, but it's yet to be seen. De-leveraging can be a formidable opponent.

I appreciate your thoughts.
Jun 16, 2009 at 9:40 PM | Registered CommenterDailyBail

Did you watch the Tavakoli video?

As for commodity inflation, it has already begun. Aluminum, copper, oil and a few other commodities are all up approx. 75-100% from their lows. We will see commodity inflation as investors seek a hedge against dollar assets. And there are trillions in dollar assets around the world whose owners are nervous about the Fed monetizing the debt.
Jun 16, 2009 at 10:10 PM | Registered CommenterDailyBail
On the inflation-deflation debate, most people have been making a distinction between inflation as an increase in the money supply vs. inflation as an increase in the general price level. But when talking about price inflation, a further distinction has to be made, because there is no "general" price level. The textbook scenario is to have prices for commodities, wages and other inputs "bid up" as the velocity of money increases, but "inflation" can also happen, as edwardo suggests, because of dislocations in the fx markets. Both processes can reduce the purchasing power of the dollar, but they will do so in different ways and have different effects on the prices of various goods.

Imagine, for argument's sake, that China decided to just drop the dollar -- regardless of the costs to themselves. The effects of this scenario are difficult to predict. On the one hand, the dollar index is likely to drop like a rock, and the prices of cheap plastic shit from China would go up in dollar terms. But what effects would this have on foodstuffs like flour, milk and bread which are produced in the US? I'm not smart enough to say for sure, but I don't think we'd see $10 gallons of milk or $5 loaves of bread in a severe recession/depression. However, we most likely would see many imported consumer goods go up in price and the market for these goods would have to adjust (think severe pain). People like Peter Schiff, who talk about a "hyperinflationary Depression" usually aren't being very precise about what kind of price effects are entailed by an increase in the money supply. The same is true of many of the "deflationists." It's certainly possible, as Steve points out, to see commodity prices rise in anticipation of more general price increases, while at the same time asset and home prices continue to collapse. These effects could be further exacerbated if foreign holders of dollars flee our currency for safer havens, which in turn will bid up prices for those "safer" assets, whatever they might be. "Slack" in the economy (aka adjustments in the capital structure) may or may not overcome the inflationary effects of trillions of dollars going into real assets or commodities.

I don't think it's possible to say for certain, especially with massive and unrpredictable govt intervention, what "inflation" will mean for us beyond an increase in the money supply. That's why I think it's far more important to hedge against the dollar than to hedge against "inflation." In any case, I'm not sure Japan can provide a good off-the-shelf comparison because we've probably already crossed the debt/gdp Rubicon, even as we clamor for more debt. Japan's financing situation was far different. If the Treasury market goes haywire, we could see immediate price "inflation" in certain products, but the larger dislocations in the real economy could ultimately lead to a further deflationary sink in the prices of non-imports, like eggs and wages. Bottom line, no one really knows what is going to happen over the next couple of years. It's probably better to be prepared for several different potential outcomes.
Jun 17, 2009 at 12:15 AM | Unregistered CommenterJames H
The key phrase is "monetize the deficit" which, of course, is "economeeze" for print money when it is needed and do NOT ask enough people to "pull in their belts" (where "people" usually means the ordinary guy.)

Economeeze disenfranchises the ordinary guy who doesn't know what it means.

And economics itself disenfranchises the ordinary financial adviser because he doesn't understand the required mathematics.

But once you master the mathematics you understand that economics is in a similar place that Chinese philosophy found itself in during the period of the 100 philosophical schools around 500 BCE. The period of Warring States followed a short while afterwards.

Hyperinflation is another economic buzz word which is overused and not understood. Rhodesia-Zimbabwe, Argentina, Germany after WWI and a few other places in the world have experienced "wheelbarrow" inflation.

But these were extreme, pathological collapses of historical proportions.

Americans over-consume almost everything. As a nation we could "pull in our belts" by cutting back our junk food consumption and long commutes to work, alone in SUV's. We could reduce our flying time, flying all over the world in private jets and on commercial airlines. We could cut back on 5 star hotels and fancy restaurants.

Hyperinflation in a country that has 5% of the world's population but consumes at least 25% of world production?

The underlying problem that has not gone away and continues to reemerge since the time of the French and American Revolution, is the irrational nature of human society and, therefore, of the human beings in human societies.

The problem goes back, at least, to Plato and is discussed in his Republic: How can a person be a "just" person (a truthful, fair, good, just citizen ...) if the society he finds himself in is evil, corrupt, unfair and "unjust?"

He can't.

Until we solve the deeper problem of organizing a better society none of these problems will be solved and we will continue to have wars, civil wars and revolutions.

Call it hyperinflation or whatever simplification you can invent but it amounts to the same thing: social chaos produced by greedy, selfish and "unjust" human beings living in corrupt, wasteful and improvident societies.
Dec 6, 2010 at 3:42 PM | Unregistered CommenterJames Street
at 5.40 of this video, mr. fisher ends a sentence with a non-english phrase, which somehow sounded to me like a hebrew equivinlant of' enshallah', arabic for 'god willing'. (both being semitic languages, the words i do not grasp, but the inflection is so similar.) and the moderator responds in kind, as is usual with the 'enshallah' usage. are there any linguists among us viewers of this dialogue that could shed some light on my linguistic curiosities? thanks very much for any leads!
stefan in prague
Dec 6, 2010 at 6:24 PM | Unregistered Commenterstefan in prague
A tree's a tree. How many more do you need to look at? Ronald Reagan
A learned blockhead is a greater blockhead than an ignorant one. Benjamin Franklin
I know that it is a trust me deal. Dickhead Fisher

God help us, please! They say that they will not monetize the deficit. Just how will they mop up the excess liquidity? Trust me says Ben Bernanke. Yes, and now they want more power. Oh yeah, please don’t politicize the Central Bank cartel. Please don’t doubt Ben’s sincerity. If it weren’t for Ben, we would be off the proverbial cliff. We would have to break bread with Blankfein’s wife at the bottom of the canyon and she would be so upset to see our ugly mugs.

Sincerity is the way to heaven. Mencius

This guy Dickhead Fisher is very affable. It is definitely the Fed’s best looking rotten foot forward.

I really like the bright blue tie. BLUE -Blue is creates trust and peace. It is also associated with loving, high regard, knowledge, social status, good health, happiness, and integrity. Blue is one of the most popular color on neckties that matches well with almost any suit. Light blue is a great color for the spring and summer. It has the effect of peace, affection and sincerity.

Trust and peace, oh yes, I feel it. What, conflict of interest? Wait, this cartel is working for me and for my buddies. We like that we have all the control so FU. Please don’t second-guess what Congress decided close to a hundred years ago. They knew all about the exotic financial instruments of destruction back then. They knew all about “overbanking”, they invented it in the 1920’s. They didn’t know about credit default swaps (1995) or collateralized mortgage obligations (1983) but all they need is a dollar, which they’ll print, and an evil dream.

Mr. Potter: [to George Bailey] Look at you. You used to be so cocky. You were going to go out and conquer the world. You once called me "a warped, frustrated, old man!" What are you but a warped, frustrated young man? A miserable little clerk crawling in here on your hands and knees and begging for help. No securities, no stocks, no bonds. Nothin' but a miserable little $500 equity in a life insurance policy.
[Potter chuckles]

Mr. Potter: You're worth more dead than alive!

Yes Mr. Bernanke, with your devotion to the banking cartel, we will all soon be worth more dead than alive. God help us!
Dec 6, 2010 at 6:26 PM | Unregistered CommenterJohn Patmos

the phrase fisher used is 'ojala'...it is a spanish phrase adopted from arabic...
Dec 6, 2010 at 6:52 PM | Registered CommenterDailyBail
What is it with the two many thousand year old dead fashion critics that keep popping up around here Steve. First Zarathustra, and now the seer.

Are you advertising in some fashion magazine or something?

So enlighten us John Patmos, is it one party in particular that you refer to as "they", or do you believe it is both parties that have been responsible for doing the bidding of their masters, I mean contributors? just curious, because some of your writings have a bit of a slant.

Being worth more dead than alive is something you get accustomed to...
Dec 7, 2010 at 2:18 AM | Unregistered CommenterS. Gompers

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