Richard Fisher would like people to stop looking to the Fed for liquidity. “We have poured on monetary accommodation,” the Dallas Fed Chairman said at the Institute’s Ideas Festival, “we havefilled the gas tank, and there’s plenty of liquidity out there. Why isn’t it being put to use?”
Uncertainty was one resounding answer. With the fate of the global economy hinging on the European Union’s ability to keep its member countries solvent and united, businesses could hardly be expected to invest the liquidity they’d been given. “You do best when you limit the uncertainty you live under,” Fisher said. “When you have maximum uncertainty, you go into a defensive crouch.”
In lieu of looking to monetary policy to solve the world’s economic woes, Fisher highlighted the role fiscal policy could play, using his home state of Texas as an example. “Under both Democrats and Republicans in Texas, we have made ourselves more business friendly. We have a tax regime with no income tax, and a regulatory environment that is investment-friendly, and the same monetary policy as the rest of the United States, and we’ve been extraordinarily successful. What we do on fiscal policy has an impact.”
But Fisher was adamant that fiscal policy must come from the people we elected to make it—politicians: “If we just run the printing presses at the Fed, that would be another disabling or confusing factor for businesswomen and men, and it would frighten them,” Fisher said. “If you’re an elected official, its much easier to say ‘let’s go print the money’ than it is to make difficult decisions that need to be made. We need to hold our elected officials accountable to making those decisions.”
