NEW YORK – The Federal Reserve has provided sufficient liquidity and Federal Reserve Bank of Dallas President and CEO Richard W. Fisher said he would oppose extending or expanding monetary accommodation and would vote to halt the $600 billion asset purchase plan that continues through June.
While the recovery is strengthening, Fisher said, “we still have a long and arduous path ahead of us.” Speaking to the Institute of International Bankers Annual Conference in Washington, D.C., Fisher said, “The news is better; job creation is gathering momentum; the economy is moving in the right direction. But it is worrisomely clear that the task of putting millions of unemployed and underemployed Americans back to work will take an anguishing amount of time,” according to prepared text of his speech, which was released by the Fed.
However, further monetary accommodation will not help. “It might well retard job creation, should it give rise to inflationary expectations or, worse, imply that, having suffered the slings and arrows of popular and political contempt as we went about doing what we did to save the financial system, we have now been compromised and become a pliant accomplice to Congress’ and the executive branch’s fiscal misfeasance. I am wary of those risks. Indeed, as a voting member of the FOMC this year, I have made clear within the meeting room and in public speeches that, barring some frightful development, I will vote against any program that might seek to extend or enlarge the substantial monetary accommodation we already have provided, just as I argued against the $600 billion extension the voters on the Committee approved last November. And I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it. As I said, the liquidity tanks are full, if not brimming over. The Fed has done its job. What is needed now is for business to be incentivized to commit that liquidity to creating American jobs. This is the task of the fiscal authorities, not the Federal Reserve.”
Businesses must have confidence in America’s future, Fisher said. That will spur job creation in the U.S. “In my judgment, it will be hard to secure that needed comfort until Congress makes clear it will refrain from the errant fiscal ways of the past, changes the way it taxes and spends and regulates, and places the nation demonstrably, and unalterably, on a path of fiscal rectitude,” Fisher said.
Fisher said he’s troubled by “the likelihood of persistent large yearly deficits long after the current recession is behind us. The same economic theory that prescribes deficits during recession prescribes surpluses during recovery to help meet the next economic challenge that might develop.” Expectations of structural deficits ahead “leaves the nation poorly positioned to weather the next recession or shock to come our way.”
