Fed is split but QE2 looks a done deal
- The opinions expressed are the author’s own-
FOMC meetings are usually a strange combination of formality and easy-going familiarity but levity may be in short supply this week. The Fed’s institutional credibility is on the line, and the normal decorum that characterizes relations among committee members has become increasingly strained over the summer.
Divisions between proponents and opponents of a second round of quantitative easing (QE2) have been on display as never before. It is not clear what members will say to one another to fill two days since all the arguments have already been rehearsed in detail and in public over the last six weeks.
In a thinly veiled swipe at his colleagues, Kansas City Fed President Thomas Hoenig has stumped around his patch on the Great Plains denouncing QE as a “dangerous gamble” and “a bargain with the devil”.
Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser have made no secret of their skepticism or outright opposition to launching QE2 at this point. Minneapolis Fed President Narayana Kocherlakota has questioned whether it will work. Richmond Fed President Jeffrey Lacker has seemed to doubt whether it is necessary.
In contrast, the New York Fed (always the closest to the major money centre banks) and the St Louis Fed (the spiritual home of monetarism in the Federal Reserve System) have openly campaigned for the benefits of a second round of asset purchases.
The final vote to adopt QE2 looks set to be 10-1 (with Hoenig dissenting). But the tally will mask much wider misgivings among the non-voting regional presidents and perhaps among some members of the Board of Governors itself, who will nonetheless fall in line with the chairman to support his authority.
“I think in late 2011 or 2012 we will look back on QE2 and either say “what a good idea” or “boy was that dumb”.
Not a chance, you know what the average American will be saying then?
“Waa waaa waaa!” followed by “how do we deal with this In a forward looking fashion?”
Right now, how many people are truely saying “3 trillion in new spending was really dumb”?
None. & 90% don’t even know that we have FNMA and FRE in conservatorship, and monitized their debt of 14trillion+. They’re always looking to fix a problem using the new “future plan” when all the answers are right there by analizing the past. History will repeat itself again. The federal govt knows clearly that their only escape is to massively devalue the dollar. Big suprise there. Been going on expotentially since 1964 ( & 1913 by some accounts)
$160 for 2 burgers w/drinks by 2015