International affairs

US Government feckless and sadly inefficient: Richard Fisher

“The economy of the United States is hog-tied by a government that is feckless, sadly inefficient, sadly ineffective, and in fact counterproductive,” Federal Reserve Bank of Dallas, President and CEO, Richard W. Fisher has told a CEDA audience in Melbourne.

According to Mr Fisher the US Government is more effective in forming committees to discuss what they might do, rather than providing businesses and citizens with the certainty they need to plan their futures.

"Under these circumstances it's no small wonder that American businesses are not expanding and growing jobs as fast as we wanted them to from our perspective at the Federal Reserve," he said.

"Our Government has played a counter-cyclical, counter-productive role as far as affecting economic growth.The inability of the US Federal Government to get their act together has countered the policy of the Federal Reserve, he said.

"I would argue that the current monetary accommodation of purchasing $85 billion a month in treasury mortgage backed securities becomes riskier by the day," he said.

"There's a tipping point where monetary accommodation comes to be viewed not as a pleasant stimulus that levitates bond and stock and housing markets all over the world… (but) instead becomes an agent of financial recklessness.

"None of us really know where that tipping point is.

"With each dollar of treasury mortgaged backed securities that we purchase…we are inching closer and closer to that tipping point.

"If you have financial instability you cannot have economic stability, you cannot create jobs, you can't keep price under control."

Mr Fisher said there is currently no incentive for fiscal authorities to bring about change and the whole US system needs to be rebooted.

"Nobody's got the gumption to get it done…we make it easy for them to avoid ultimately making a decision," he said.

On the market side, Mr Fisher told the markets to grow up and stop behaving like children whose candy has been taken away.

The markets are deeply concerned but in the end our job is the real economy, the people in the middle income quartiles, he said.

"Has our policy improved their prospects for acquiring a job, being given a job and expanding their own prosperity?"