Thursday, September 13, 2007

The Fisher Smackdown (9/10/07)

Richard Fisher, president of the Dallas Fed and current non-voter, gave a speech on Monday, nominally about The U.S., Mexican and Border Economies, though half the speech was about the U.S. economic outlook.

Before we get into this speech, a few words about his style: Fisher's speeches have this down-to-earth, straight-shooter, vernacular quality to them that I really like. He comes across as the kind of guy you'd want to have a drink with. I don't remember ever reading a dry speech from him. You can think of him as an
everyman version of Janet Yellen. He also likes jokes and puns, which brings me to his current speech.

In recent weeks, we have heard much about financial market turbulence. We've been distracted by the noise of the subprime fallout, periodic reports of a "seizing up" in asset-backed commercial paper markets, volatility in the stock market and tremors in other parts of the financial infrastructure. (Apparently it is no longer true that, as Andrew Mellon once famously quipped, "Gentlemen prefer bonds.")

HA! You have to admit, it's not the Tonight Show, but for a Fed speech that's funny!

OK, now in all seriousness, here's Fisher's money quote:
Amidst this clamor and drama, some might have lost sight of our economy's great resiliency. ... Given the financial turmoil that began last month, I am generally encouraged by what I have heard and seen so far: As yet, tighter credit conditions do not appear to have had a major impact on overall economic activity outside of real estate.

So he'll be arguing for a 25bps, rather than 50bps, cut on Sept 18 (not cutting isn't really an option).

And now my favorite part. I may well just be projecting here, and he pulls it off with a completely straight face (at least on paper), but this looks to me like a much needed smackdown of that CNBC madman who accused the Fed of being "out of touch" and "asleep at the wheel."
As we approach the upcoming session of the FOMC, each of the participants, including me, is diving deep into the data and taking soundings from business leaders, bankers and others with operating ears to the ground to ascertain the current pace of the economy and—this is important—the prospective dynamics of growth and inflation. I am particularly active on this front. Before each meeting, I speak with around 30 CEOs and CFOs of a careful selection of large and small companies from around the country in order to get an in-depth understanding of the pace of economic growth and price pressures they see through their businesses. Meanwhile, our staff routinely surveys a broad base of businesses within our district and reports their findings in what is known as the Beige Book, the most recent of which was released last Wednesday. Lately, I have focused on how recent developments in financial markets are impacting the revenues and costs, supplier and customer dynamics, product mix and growth projections of these hands-on operators of our economy.... it is fair to say that I am encouraged by what I have heard against a background of constant negative speculation and the occasional discordant note, such as last week's employment numbers. Our economy appears to be weathering the storm thus far.
Booyah that, J.C.!

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