The Doubts Fed Officials Are Raising About Central Bank Policies
Questions are being asked following last week’s announcement of the Federal Reserve’s new monetary policy that will provide economic stimulus through monthly mortgage-backed securities totaling $40.0 billion per month. Central bankers are now voicing a concern similar to what I’ve stated numerous times; can this monetary policy be effective in lowering the unemployment rate?
Obviously, the Federal Reserve is doing what the majority of voting regional bank presidents feel is best for the American economy. I don’t doubt their sincerity at all; I just doubt the efficacy of the monetary policy stance. I’m not alone, as two loud voices continue to raise similar doubts: Richmond Federal Reserve President Jeffrey Lacker, who was the lone dissenting vote in an 11-to-1 approval for last week’s new monetary policy initiative, and Dallas Federal Reserve President Richard Fisher, who is not a voter in this current year. But Fisher did just announce that, had he voted, he also would not have approved of this new monetary policy stance.
Richmond Federal Reserve President Jeffrey Lacker has publicly stated that he believed additional quantitative easing through such a new monetary policy stance would do little to help the unemployment situation.
Dallas Federal Reserve President Fisher has been one of the most interesting central bank members to listen to; he presents an eloquent and thoughtful argument with a great combination of economic data and common sense. I do respect him for his congenial method of disagreeing with the majority. I wish that more public figures would take lessons on how to present a thoughtful argument without having to resort to a shouting match. This is part of the reason that the political system is breaking down; there is no respect for the other political party, as politicians just want to yell over each other, pointing fingers and tattling on each other much like school children.
Federal Reserve President Fisher has stated that, and rightfully so in my opinion, he believes that these new monetary policy initiatives have much less of an impact on the economy because of other impediments, including concerns over fiscal policies.
On CNBC, the Dallas Federal Reserve President states, “I would like to see people going out and build and commit to capex that’s job creating in the United States and have some more immediate effect. I don’t think this program will have much efficacy.”
I couldn’t agree more with a Federal Reserve member. Considering the amount of corporations that have consistently stated their fears regarding the future fiscal policy of America and their uncertainties for 2013, enacting this monetary policy initiative now is akin to placing a small bandage on a massive gunshot wound.
I will give credit to Federal Reserve Chairman Ben Bernanke, as he, too, has stated that monetary policy has its limits. However, I believe he should have held back on new monetary policy maneuvers until some improvements on the fiscal side began to emerge. Dallas Federal Reserve President Richard Fisher said it best on CNBC: “So it’s up to your views and everybody else, they own the Congress, they vote for them. Get your act together Congress.”