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Dallas Fed President Richard Fisher has earned his reputation as one of the central bank's most hawkish members. Fisher balked against much of the Fed easing in the first half of 2008 and opposed QE2 last year. Fisher dissented again at the Fed's August meeting, when the central bank pledged to keep rates at extraordinarily low levels until mid-2013.
On Monday, Fisher gave a speech in Dallas before the National Association for Economists in which he sought to give the rationale for his dissent and the reasons why ample Fed liquidity hasn't translated into strong economic growth.
In an exclusive interview following the speech, Fisher joined me to discuss these and related issues although he (not surprisingly) declined to predict how he'll vote at the Fed's Sept. 20-21 policy meeting.
"We don't yet know what proposals will be [and] I can't tell you until we have that discussion," he said.
Fisher also declined to say what conditions, if any, might prompt him to accept (or even advocate) additional policy action. Still, he did acknowledge the "overall fragility of our economy" and expressed grave concern about the grim outlook for jobs.
U.S. Economy at Stall Speed
While admitting the obvious —the U.S. economy is "not proceeding in a robust manner" -- Fisher believes the U.S. has not "dipped into recession" at present, citing strength in August retail sales and multi-family home sales as signs of life.
Meanwhile, Fisher seems fairly unconcerned about inflation at the present time, which is unusual for someone associated with a hawkish view.
So I asked Fisher: If the economy is "slowing down" and approaching "stall speed" and inflation is not a clear and present danger, what's the harm in more Fed easing, be it QE3, 'Operation Twist' or some other policy action yet to be publicly discussed.
His answer: "We've already done a substantial amount. We have refilled the gas tanks. There is abundant liquidity [and] the cost of money is cheap," Fisher says. "The problem is transmitting that into the economy. We've done our job. We need someone to engage the transmission and put that money to work."
In sum, Fisher does not think the problem is monetary policy. "I think it lies elsewhere," he says.
Stay tuned for part 2 of this interview where Fisher discusses what he says are the roots of America's economic malaise and part 3, where he addresses the Fed's role in creating the crisis and the impact of easy money policies on the dollar.
Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com
