Stanley Fischer appeared at a recent International Monetary Fund event, with current Federal Reserve Chairman Ben Bernanke, as well as former Treasury Secretary Larry Summers. That video may be worth watching if only to see Bernanke and Summers clash over the benefits of quantitative easing.
Seib & Wessel: The Options for Exiting Easy Money
Federal Reserve Bank of Chicago President Charles Evans tells an IMF forum his branch has added $1.25 trillion to its balance sheet during QE3 and discusses the conditions under which central banking will ease off its easy money policy.
- ECB President Mr. Draghi on ‘Nationalistic’ Attacks, Forward Guidance and Communications November 30, 2013
- The European Central Bank may be Forced to Adopt Unconventional Stimulus Policies November 30, 2013
- Deflationary Dangers Arrive in Europe November 30, 2013
- Will A Quantative Easing Program Come To Europe? November 30, 2013
- U.S. National Debt Finally Addressed November 1, 2013
- QE’s Excess Reserves…………High Time to Re-engage November 1, 2013
- QE Ultimate ‘Unwinding’ Strategy October 25, 2013
- QE Cannot Cause Inflation October 18, 2013
The stated intention of the Federal Reserve is to maintain low interest rates, stimulate the economy and foster a climate of job creation while lowering the U.S.’s debt servicing costs and generating a profit on its portfolio.
Instead of tapering methodically, the Federal Reserve may look to surgical tapering by increasing QE purchases when interest rates move up and reducing purchases when interest rates are low. This would guarantee a profit for the Fed, provide stability in the debt and equity markets but say explicitly to the market place where it wants interest rates to be.
The Federal Reserve is not in the business of direct job creation, even though their ‘Full Employment’ mandate is a primary directive. This is Washington’s responsibility and function. But with Washington fragmented politically on economic policy while not taking responsibility for the wholesale export of American jobs for decades now, some form of compromise is required. Washington approving legislature for ‘A National Infrastructure Job Creation Program’ and the Federal Reserve’s ‘QE Job Program’ providing the financing.
While it appears there is discord publically among Fed officials on ‘forward guidance’, it is of critical importance for the markets to hear clear ‘Fed Speak’ on the issues of tapering and particularly ‘Unwinding’. Without clear guidance the markets are left to ponder irrational expectations which only the Federal Reserve has the power to transform into ‘Rational Solutions’.
The Federal government has a responsibility to balance the budget. Only when Washington can finally manage and maintain a balanced budget that eventually culminate into surplusses, will the Federal Reserve Bank have the flexibility as well as investors confidence to begin unwinding QE. If the U.S. government cannot control it debt spiral, investor and the markets will face stiff volatility and there will be more sellers than buyers of treasuries.