Friday, July 11, 2014

I Just Sent Fed Vice-Chair Stanley Fischer...

...a copy of Austrian School Business Cycle Theory by Murray Rothbard.

Fischer's lack of understanding as to how Fed money printing causes current-day booms, and his lack of understanding as to stock market activity as a reflection of the undercurrents in the entire economy as a result of Fed money printing, is quite stunning.

In his first speech since becoming vice-chair of the Fed,  Fisher spoke at an NBER conference in Cambridge, Massachusetts. In a question-and-answer session following the speech, Fischer said that at the moment he doesn’t see significant threats to financial stability. “At present we don’t face … any serious asset-price problems,” he said.

He was specifically referring to stock prices.

Here is a transcript of CNBC's Steve Liesman recapping Fischer's stunning comments:
Stan Fischer the new Fed vice chair gave his first speech yesterday and he was asked after his speech...whether or not there's an equity level ,the stock market can go down without producing a financial crisis. ... Here is what Stan said last night:

At present we don't face a very serious macro -- any serious asset price problems. I think there's a general concern about how strongly the equity markets are, but, I don't think -- I think when you're dealing with equity, the stock market can go down without producing a financial you've got to keep checking and you've got to keep listening to what other people say. and if you were to decide that you didn't have macro prudential measures, and there was a problem, you'd have to think of using the interest rate."

So a couple things about that. The first thing is Fischer's idea of an equity bubble and our idea of an equity bubble are a little different. The Fed's concern is can the market pop without creating financial instability? without getting systemic risk. That's one. The other one is whether or not the Fed needs to come in and use the interest rate ahead of time, might be a little different between Fischer and Yellen on this. He seems a little bit more willing.
Bottom line: The top people at the Fed, Janet Yellen and Stanley Fischer are almost like blind automobile drivers attempting to steer by using the gas pedal as a steering wheel every time they feel they have hit a bump. Scary, very scary.



  1. send him this:

    How Derivatives Will Trigger A Bond Market Melt-Down (Part 1)

    Get your money out of the bond market. Once the default-contagion starts, it will spread faster than the bubonic plague which caused the Black Death in the 14th century. I just got off the phone this morning with a source in NYC who confirmed that several Wall Streeters he knows all believe a far bigger “Long Term Capital” collapse triggered by derivatives defaults could occur at any time:

  2. I received my copy today. Very nice book.