Federal Reserve official: ‘We can’t carry a balance sheet that grows to infinity’

Speaking at a conference in Sydney, Australia on Monday, Federal Reserve of Dallas president Richard Fisher took shots at the immense United States stimulus program and the dramatic growth of the federal government. In other words, Fisher lays the blame on Washington for the nation’s lack of economic recovery.

“I am not a proponent of increasing government spending without restraint,” said Fisher in a speech released Monday. “The excessively over-indebted US government has, as mentioned, been hog tied – prevented from providing stimulus. It has thus played a counter-cyclical, suppressive role. The inability of our government to get its act together has countered the pro-cyclical role of the Federal Reserve.”

In addition, Fisher, who made the note that his views he was expressing were entirely his own and not shared with other Fed bank presidents, said it wasn’t a good policy by Republicans and Democrats for spending money without coming up with proper revenue streams.

“We have a government that hasn’t been able to agree on a budget in five years; that has historically, under both Republican and Democrat presidents and Congresses, spent money and committed itself to fund long-term programs without devising revenue streams to cover current costs or fund future liabilities,” explained Fisher.

These surprising remarks coincide with the central bank suggesting that tapering its quantitative easing measure will not come to fruition anytime soon – some Fed leaders say there is no hurry because inflation is quite low.

However, Fisher, speaking in a packed room full of economists and financial experts, says the present monetary policy is unsustainable.

“We can’t carry a balance sheet that grows to infinity; this is common sense,” stated Fisher. Although he didn’t provide an exact date for when a potential taper transpires, he did suggest that it was going to happen soon. In the end, Fisher believes that record-low interest rates and $85 billion monthly stimulus (cheap money) will lead to another crash in the U.S. economy.

What’s interesting to note is that he rightly criticizes both the Fed and Congress, but what has been fueling such reckless behavior in Washington? Record-low interest rates and cheap money have been the culprits for so long.

With that being said, he’s worried now about the balance sheet, but wait until Janet Yellen takes the keys from Ben Bernanke next year.

Like this article? Get ECN delivered to your inbox daily. Subscribe here.

Leave a Comment