Toro
Diamond Member
From a speech by Richard Fisher, head of the Dallas Fed.
A Need for Innovative Fiscal Policy - Richard Fisher Speeches, 2-8-10 - News & Events - FRB Dallas
But here is the essential fact I want to emphasize and have you think about today: The Fed could not monetize the debt if the debt were not being created by Congress in the first place.
The Fed does not create government debt; Congress does. Deficits and the unfunded liabilities of Medicare and Social Security are not created by the Federal Reserve; they are the legacy of Congress. The Fed does not earmark taxpayer money for pet projects in local communities that taxpayers themselves would never countenance; only the Congress does that. The Congress and administration play the dominant role in creating the regulatory environment that incentivizes or discourages job creation.
It seems to me that those lawmakers who advocate Ending the Fed might better turn their considerable talents toward ending the fiscal debacle that has for too long run amuck within their own house.
A look within the United States makes clear the overriding influence of fiscal and regulatory policy. Monetary policy is uniform across the 50 states; the base rate of interest paid on a business or consumer loan or a mortgage in Michigan, California, Ohio or New York is the same as that paid in Texas. Yet there is a reason that Michigan and California each lost more than 600,000 jobs over the past decade while Texas added more than 700,000 over the same period. There is a reason that the population of Ohio grew by only 183,000 residents over the past 10 years, while Texas grows by that number every five and a half months. There is a reason that with each passing census, the state of New York has been losing congressional seats and Texas has been adding them; a reason that, in the recent census, California failed to gain any while Texas gained four. There is a reason that, as documented in the Jan. 12 issue of the Wall Street Journal, college graduatesthe best and brightest of the successor generationare leaving New York and Cleveland and Detroit and moving to Austin, Texas.[6] There is a reason no state in the union houses more Fortune 500 headquarters than Texas. There is a reason for the disparate employment growth that has taken place in the 12 Federal Reserve districts over the past two decades, data that are documented in the graph at your place setting.
That reason has nothing to do with monetary policy. It has everything to do with the taxation and fiscal and regulatory policies of the states. The cost of capital does not explain the different economic performances of the states; the cost of doing business has everything to do with those differences. However well-meaning tax and regulatory initiatives in the laggard states may have been when they were conceived and levied, they have had unintended consequences that have led to economic underperformance and job destruction.
Similarly, the key to correcting the underperformance of the American economy and American job creation does not presently rest with the Federal Reserve. It is in the hands of those who make fiscal and regulatory policy.
A Need for Innovative Fiscal Policy - Richard Fisher Speeches, 2-8-10 - News & Events - FRB Dallas