How About Regulating the Fed?

Dallas Fedhead Richard Fisher is at it again, this time expressing a tiny bit of concern over the threat of deflation. Umm... has he spoken to Zimbabwe Ben lately? I can't imagine that deflation should be too much of a worry. Reuters reports:

U.S. central bankers will pay special attention to ensure the economy is not strangled by a persistent decline in prices, or deflation, a top Federal Reserve official said on Tuesday.

"Deflation is as dangerous as inflation, and we will take every step to counteract it," Richard Fisher, president of the Federal Reserve Bank of Dallas, told reporters after a speech at Bryant University in Smithfield, Rhode Island.

As companies across the country cut jobs and consumers spend less, many economists are worried about the potential for a sustained decline in prices.

The Dallas Fed calculates price pressures based on personal consumption expenditures, or PCE, and in the bank's December report, the bank found that more than 50 percent of the market basket was going down in price, Fisher said.

But Fisher cautioned it was far from certain whether this decline will continue in coming months.

"There are price pressures on the downside, but we will make sure that deflation does not take hold," Fisher said.

At the same time, Fisher said U.S. central bankers are keeping a watchful eye on inflation. Some economists have voiced concern about the potential for inflation down the road as the Fed has cut interest rates to near zero and pumped hundreds of billions of dollars into the financial system to unfreeze key credit markets.

Kansas City Fedhead Thomas Hoenig said just a little over a month ago that while always a small possibility, deflation is unlikely and not worth the worry. So which story are we going with here guys? Can the Federal Reserve get their act together and agree on one lie to spew across the board?

Dear Mr. Fisher and the rest of the Federal Reserve Dollar Destruction Team: Deflation is a highly unlikely possibility if you continue to pump out the funny money and make promises to floundering financial institutions to keep them covered. It's called debasing the currency, guys, and unlike most of what you're pulling out of your a$$ets lately, you're doing it right.

Fisher also said it will be tough to overhaul the nation's regulatory system in the wake of failures that included regulators' initially missing the Madoff case and overly aggressive lending to homeowners.

"It will be simplified," Fisher said of the regulatory system. "The problem with Washington is that nobody wants to give up authority and this will be a tough negotiation," he added, noting, "It ought to come out simpler and more productive than it is now."

But he also warned that regulation must not stifle innovation. "You can't contain human initiative, but that doesn't mean you shouldn't be able to guide it somewhat," he said.

I have a suggestion for Mr. Fisher: Regulate the Federal Reserve. It is surely a Pandora's box they don't want to open up, so if he's going to be bold enough to suggest more regulation, he's got to also accept the possibility that his own crooked institution will feel the regulatory crunch.

Have fun with that one, guys...

Comments

[Steven Hansen]

how about simply replacing the Fed. the concept that bankers can govern the economy with smoke and mirrors with no accountability to the electorate is not what the framers of the constitution had in mind.

2009 Feb 27 12:40 AM

[Dave Wrixon]

The Fed is in the process of losing all credibility. Their days are numbered.

Having said that Americans aren't the sharpest tools in the box, so the gravy train will continue for a while longer yet!

2009 Feb 27 01:13 AM

[Nathaniel C]

We need to abolish the illegal Federal Reserve which was created by the bankers for their benefit. Thanks to the Fed, the US dollar has lost 95% of its purchasing power since 1913.

It is incredible to me tha the Fed is still concerned about deflation when the recent PPI and CPI were both solidly positive. Von Mises warned that the Fed and other central banks use the fear of deflation as an excuse to debase the currency through printing copious amounts of money, all in the name of protecting the economy from deflation. Bernanke has hinted in the past that FDR's massive devaluation of the dollar during the depression was a good thing. This seems to be Bernanke's endgame. I guess we can all look forward to $10 milk and $8 gas.

ABOLISH THE FED!!!!

2009 Feb 27 01:18 AM

[zanardm]

Bring in a Fed Reserve Bank manager, together with an IT team to replace and upgrade software for security and reliability. Then bank management team. One needs bank management controls, and accountability and transparency, in order to minimize debt, other than congressional/adm budget debt, of course. The Fed has already shot an enormous wad, with NO result. It's time for a change to a conservative play. Close the windows! Bring in a team and a bank manager as head.

2009 Feb 27 01:45 AM

[Moon Kil Woong]

No one should have the ability to artificially mess with interest rates asides from Congress through coining money, taxation, and spending. That's the way the founding fathers envisioned it. Treasuries should be auctioned by the government openly to anyone not siphoned through 1 monopolistic central bank.

Artificially manipulating interest rates creates too much economic instability either in the present or the future. Of course this is all academic. The odds such a powerful institution will relinquish it is close to 0%. After all, they will argue that the public needs a paternalistic bank looking after us to prevent the economy from going into downturns due to poor fiscal management and uncontrollable bouts of monetary expansion and contraction due to poorly managed interest rates.

2009 Feb 27 01:50 AM

[Tradememe]

Talking about the Fed, Milton Friedman said he would abolish the Fed and replace it with a computer that would increase money supply by 2% every year.

2009 Feb 27 03:41 AM

[@TexasER]

The problem is that the Fed’s scope has increased beyond its purpose. They are suppose to maintain pricing stability, not try to manage the business cycle. In essence their attempt to do this is the root cause of our crisis.

Tradememe: Good old Milton’s solution gets my vote too.

2009 Feb 27 12:01 PM

[fireball]

the fed a private organization purchases the dollars printed at the cost of printing then loans them to our govt. with interest and we are liable for the incurred debt. pretty good scam.
they have never allowed a public audit, to my knowledge. the stockholders are a secret.
jfk tried to take control of our money supply with the issuance of debt free united states notes and lived 30 days. one of johnson's first acts was to return control to the federal reserve. what a koinkidink.
i would like to purchase shares in this private organization.
nobamy it was what can i do for my country not what can i do to it.

2009 Feb 27 12:14 PM

[PainfullyAware]

The Fed was created by Lobbying Congress To give up their Constitutional Mandate over the US money supply.

When You Can Create Money Out Of Thin Air You Can Buy Governments.

What is being witnessed today is the result of the Funny Money System that the Fed has implemented. It sure is a fun ride until the track runs out.

Sound Money, as Ron Paul advocates, may not have the appeal to those on the side of money creation but it is imperative to Reduce The Magnitude Of These Corrections.

"Let me issue and control a nation's money and I care not who writes the laws." - Rothschild

2009 Feb 27 05:25 PM

[Burticus]

To save what is left of Amerika, SHED THE FED!

2009 Feb 28 05:47 AM