Fed Feds

A friend sent me this link to a January 12th, 2011 speech by Richard W. Fisher. Mr. Fisher is president and CEO of the Federal Reserve Bank of Dallas. My friend attached this note:

This short speech is 1/4 defense of the Fed, 1/4 attack on the General Government, 1/4 warning of storms ahead, and 1/4 PollyAnna. Worth reading …

My friend was correct. You should read it, too.

After reading it, I had these thoughts:

I think defending the Fed while dissing the Feds puts more emphasis on the latter’s sibilant than it can bear. I appreciate Mr. Fisher isn’t happy with the “Fed, Feds,” but that’s like Whoopie Goldberg’s infamous comment regarding Roman Polanski’s violation of a 13 year-old female, “it wasn’t Rape, Rape.”

Ending the Fed would not, as Fisher says, necessarily end the fiscal debacle. But never having had the Fed would have made that debacle significantly more difficult to implement. The Fed does, indeed, not create government debt. It merely enables “fiscal authorities” like Timothy Geithner and Ben Bernanke to do so.

Fisher sees this quite clearly, I think. Yet, he is able to say,

The Fed has reduced the cost of business borrowing to the lowest levels in decades. It has seen to it that liquidity is widely available to banks and businesses. It has kept the economy from deflating and it has kept inflation under control. This has helped raise the economic tide. Recent data make clear that the risks of a double-dip recession and deflation have ebbed and that economic growth and job creation are beginning to flow.

Perhaps none of that would have been necessary without the Fed enabling the Feds.

Taking the speech as a whole, perhaps that quote represents irony. Maybe sarcasm. Either way, it argues that the good guys in the Fed(s) periphery, however free-market oriented, are not doing God’s work. Or Adam Smith’s. Or John Cowperthwaite’s. Or Milton Friedman’s.