Richard Fisher, president of the Dallas Federal Reserve and a member of the rate-setting Federal Open Market Committee, said in an interview with the Financial Times that while the big players in financial markets acted like “feral hogs” by scenting any weakness in policy makers’ intent, he did not think anyone could break the US central bank.
Commenting on the market turbulence that has followed Fed chair Ben Bernanke’s signal that the bank could begin tapering its $85bn monthly bond purchases before the end of this year, Fisher told the FT: “My personal feeling is that you don’t walk up to a lion and flinch.
“Markets tend to test things,” Fisher said. “We haven’t forgotten what happened to the Bank of England [on Black Wednesday]. I don’t think anyone can break the Fed . . . . But I do believe that big money does organise itself somewhat like feral hogs. If they detect a weakness or a bad scent, they’ll go after it.”
Fisher apparently views the current weakness in the stock and bond markets as something akin to a game of chicken, where the Fed or the markets will blink first.
The fact of the matter is that market activity during a period of central bank money manipulation is all about money flows. Fisher doesn't seem to get this. When money is flowing into the system, price inflation results. first in the capital goods sector, e.g. the stock market,bond market and real estate, and later in trickle down fashion to the consumer sector. The recent strength in the stock and bond markets has been the result of strong money flows into those sectors, which have now slowed significantly.
It does not appear that Fisher, Bernanke and other Fed members realize the significance of the slowdown in M2. It is behind the current weakness in the US markets,warned about for weeks at the EPJ Daily Alert.