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Dallas Fed Head: Fiscal Policy Uncertainty Holds Back The Economy

In an interview with CNBC's Rick Santelli, Richard Fisher, head of the Dallas Federal Reserve discusses what he thinks is holding back economic growth. He is speaking for himself, not the Fed. 


FISHER: You know Rick, we all know, monetary policy has been extremely accomodative. We've driven rates to nil, we've moved way out in the yield curve, interest rates are at the lowest point in the history of the American Republic. And yet we weren't seeing the transmission through to job creation which is part of the dual mandate of the Federal Reserve. Inflation is not an issue, it's neither destructive, in terms of deflating -- we're running a little bit less than two percent. I don't think you could say that inflation is doing any damage to the economy. The question is why aren't we seeing job creation?

I think we do know the answer. And I think we, as a committee, referred to it in a single sentence, a little more forcefully in the last statement, and that is  fiscal policy. You cannot make decisions under conditions of total uncertainty. We have a massive fog here. Businesses are well-structured from a financial standpoint, stock prices are high, leverage has been reconstructed, companies are rich in cash, we have a lot of cash sitting on the sidelines. Question: Why isn't it going into the economy? Answer: I think, my opinion, as you said earlier, is pretty clear: We don't know what taxes are going to be, we don't know what spending is going to be, we don't know what the regulator overload is going to be, we don't know what the cost of healthcare is going to be. So, the fault lies with the fiscal authorities, and until they get their act together and give us some certainty, I don't think we're going to see the kind of growth we'd like to see. We are doing better than all the rest. We're the best-looking horse in the glue factory, but we could do better still. We have great potential as a country, and its not being realized because politicians are holding us back. 


FISHER: First of all, there have to be practical limits to how we build our balance sheet. We're going in the direction of having a $4 trillion balance sheet. So we know we can't go on forever. There is no QE-infinity. This has been an effort to juice the economy, and it has done its work, but the question is what are the limits. 

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