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Goldman's Q&A On Stanley Fischer As The Next Fed Vice Chairman

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Since the bank that decides what happens at the NY Fed, and by implication, at the broader Federal Reserve system, is none other than Goldman Sachs, it would be informative to read what none other than Goldman thinks of Ben Bernanke's thesis advisor Stanley Fischer, formerly head of the Bank of Israel, as the next vice chairman - as he is now actively rumored to become shortly. Conveniently, here is just such a Q&A from Goldman's Jan Hatzius - the man who feeds Bill Dudley all his economic and monetary insights over lobster sandwiches at the Pound and Pence.

Q&A on Stanley Fischer

  • Stanley Fischer?formerly governor of the Bank of Israel and first deputy managing director of the IMF?appears very likely to be nominated for the position of Fed Vice Chairman, according to multiple media reports.
  • Fischer is a highly respected academic macroeconomist and policymaker, and would undoubtedly have a substantial amount of influence on the FOMC. When head of the Bank of Israel, he oversaw an aggressive monetary policy response to the crisis which included purchases of longer-term securities.
  • With respect to monetary policy at the zero lower bound, he has generally spoken favorably about quantitative easing but has expressed more skepticism about forward guidance. Nonetheless, we think forward guidance will continue to be a key item in the Fed's toolkit.

Stanley Fischer appears very likely to be nominated for the position of Fed Vice Chairman, according to multiple media reports. According to some accounts, Fischer has already been offered the job by the President and has accepted it, although a formal announcement is not expected immediately.

Q. How does Fischer broadly think about the economy?

Fischer is a highly respected academic macroeconomist. He is credited with helping to lay the foundations of New Keynesian macroeconomics, which sought to place traditional Keynesian theory on a stronger microeconomic foundation. Subscribing to this school of thought, we believe that Fischer's general view of the world is similar to that of Bernanke and Yellen, with a significant role for active fiscal and (more importantly) monetary policy. In fact, Fischer was Bernanke's dissertation adviser in graduate school, and Bernanke recently referred to him as a "role model and frequent adviser." As a result, we see little daylight between Fischer and the current core FOMC leadership with respect to their basic paradigm for thinking about the economy.

Q. How would his appointment affect the dynamics on the Committee?

Fisher is widely seen as a policy heavyweight, having not only run the Bank of Israel, but also served as the chief economist at the World Bank and First Deputy Managing Director (the number two position) at the IMF. Both his academic standing and policy experience suggest that Fischer's views will be very influential on the Committee.

Q. What are the key points from his tenure as head of the Bank of Israel?

Under his tenure, the Bank of Israel aggressively cut its policy rate from 4.25% to 0.5% in the wake of the financial crisis. Starting in February of 2009, the Bank of Israel joined the Fed in undertaking purchases of longer-dated securities, indicating a willingness to adopt unorthodox monetary policy measures. The stated intention was to "extend the effectiveness of monetary policy onto longer interest rate maturities." However, later in 2009 the Bank of Israel began hiking its policy rate, in advance of all major global central banks. We do not see this as necessarily indicating a "hawkish" policy bias on the part of Fischer, but rather a reaction to the fact that economic developments in Israel were substantially different from those prevailing in the G4 economies. The Bank of Israel did not adopt explicit calendar- or outcome-based forward guidance under his leadership.

Q. What are his views on balance sheet policy?

Fischer generally holds a favorable view on the effectiveness of balance sheet policy. As noted, the Bank of Israel began a program of longer-dated securities purchases under his watch. He also stated in a November speech at the IMF that one of the key lessons from the financial crisis, in his view, was that monetary policy is not impotent once the zero lower bound on short-term interest rates has been hit. He specifically highlighted the efficacy of the Fed's QE?which he said was supported by a substantial amount of academic work?and did not explicitly mention forward guidance on the path of short-term interest rates.

Q. What does he think about forward guidance?

In contrast to his statements on QE, he has recently expressed a more skeptical view of forward guidance. Specifically, he noted in September that "if you give too much forward guidance you do take away flexibility," that "we don’t know what we’ll be doing a year from now. It’s a mistake to try and get too precise," and that "you can’t expect the Fed to spell out what it’s going to do…because it doesn’t know." These statements contrast with Yellen's strong endorsement of forward guidance. In that sense, Fischer's statements do pose at least some risk to our expectation that the FOMC will ultimately enhance its forward guidance by reducing the unemployment threshold to 6.0%. That said, such a limited number of statements are unlikely to capture all of the nuances of Fischer's thinking on the topic. One can also argue that his criticisms apply mostly to calendar-based guidance and less to outcome-based guidance, which only requires the Fed to "spell out what it's going to do" in a more conditional sense. In any case, we have little doubt that Yellen and Fischer would see eye to eye on the need to prevent a large tightening of financial conditions anytime soon, so the slightly greater uncertainty that might result from his nomination is mainly about tactics, not strategy.

Q. What is the likelihood of confirmation?

If nominated, we think Fischer would very likely be confirmed. In the unlikely event that his confirmation faced substantial opposition from Republicans, the recent change to Senate rules requiring only a simple majority to break a filibuster on confirmation votes ensures that he could be confirmed with only Democratic votes.

 

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Thu, 12/12/2013 - 07:38 | 4239049 GetZeeGold
GetZeeGold's picture

 

 

Next Fed Vice Chairman

 

aka the fall guy.

Thu, 12/12/2013 - 07:39 | 4239052 negative rates
negative rates's picture

Umm, lobster.

Thu, 12/12/2013 - 08:01 | 4239067 mvsjcl
mvsjcl's picture

aka the person who really runs things.

Thu, 12/12/2013 - 08:04 | 4239070 GetZeeGold
GetZeeGold's picture

 

 

I'm just glad the Vice Chairman is getting some ink......you hardly ever hear about that guy.

Thu, 12/12/2013 - 08:34 | 4239099 Tabarnaque
Tabarnaque's picture

They have plenty of ink at the Fed.

Thu, 12/12/2013 - 08:49 | 4239112 GetZeeGold
GetZeeGold's picture

 

 

Just in case someone needs physical paper.

Thu, 12/12/2013 - 08:22 | 4239086 XAU XAG
XAU XAG's picture

Makes no odds who it is.

 

Someone else pulls the strings on thease pups

Thu, 12/12/2013 - 08:34 | 4239098 mvsjcl
mvsjcl's picture

Yep. The titular "head" is just a puppet. No real power. The number two or three really runs things, knows the system, has the decoder ring and takes the orders from the "Unseen" ones and ensures that they're followed.

Thu, 12/12/2013 - 11:28 | 4239566 robertsgt40
robertsgt40's picture

No doubt Stanley is a "global" thinker. His primary concern is saving the banks, not the economy or people.

Thu, 12/12/2013 - 07:45 | 4239055 Iocosus
Iocosus's picture

So Carney goes from BOC to BOE because....... Canada is under control of the British crown.

Fischer goes from BOI to the Fed because........ the US is under Israeli control????

Thu, 12/12/2013 - 07:56 | 4239062 Oquities
Oquities's picture

he's a very jewish jew - so he's qualified.

Thu, 12/12/2013 - 09:12 | 4239145 dick cheneys ghost
dick cheneys ghost's picture

betcha he owns a condo on Rothschild Blvd in Tel Aviv

Thu, 12/12/2013 - 07:48 | 4239056 Stockmonger
Stockmonger's picture

Welcome to the US Federal Reserve, a division of the Bank of Israel 

Thu, 12/12/2013 - 07:52 | 4239057 fonzannoon
fonzannoon's picture

who cares. someone just please tell someone to make the market get  back to going up every single day please. yesterday was a buzzkill.

Thu, 12/12/2013 - 07:57 | 4239064 Calculus99
Calculus99's picture

"academic macroeconomist"

So another high IQ moron then with only TWO tricks -

1. Cut rates

2. Print

Thu, 12/12/2013 - 07:58 | 4239065 Budd aka Sidewinder
Budd aka Sidewinder's picture

I stopped reading @ Bank of Israel

Thu, 12/12/2013 - 08:09 | 4239072 buzzsaw99
buzzsaw99's picture

another joo banker, what a shocker

Thu, 12/12/2013 - 08:37 | 4239101 new game
new game's picture

 

Fischer is a highly respected academic macroeconomist. He is credited with helping to lay the foundations of New Keynesian macroeconomics, which sought to place traditional Keynesian theory on a stronger microeconomic foundation.

 ok we have it - same fucking snow job/ debt based control with these academic macro econ sociopathic fuck heads in charge of our lives via money/debt controls established in 1913 in secret...

 

Thu, 12/12/2013 - 08:39 | 4239105 WTFUD
WTFUD's picture

SING ' balls to your partner , arse against the wall
if you don't get fucked now, you'll never get fucked at all '

Let's ALL do the Circle Jerk

Ok so Goldman run the Sovereign Euro Troikas and now run the Central Banks.
CASH IS KING CASH BUYS LOYALTY.

So it is Not Only the spotty indebted college kid who doesn't have the right skill set to apply for these corporate/ managerial positions as we are forever hearing BUT obviously a domestic shortage of management to fill these TOP posts at the central banks.

In short we are all too stupid and maybe too patriotic to assfuck our citizenry

Thu, 12/12/2013 - 08:46 | 4239111 Peter Pan
Peter Pan's picture

You can't run a country's economy based just on QE and ZIRP.
Unless congress wakes up to itself good old Stanley will not achieve much.

Thu, 12/12/2013 - 09:24 | 4239181 pupdog1
pupdog1's picture

First, Goldman's interests.

Second, Israel's interests.

Third, American interests.

And we will never see #3.

Just when I think Obama can't carve out a new low...

Thu, 12/12/2013 - 11:29 | 4239573 Colonel Klink
Colonel Klink's picture

Trust me, America's interest isn't that high up the list.

Thu, 12/12/2013 - 10:33 | 4239382 Honey Badger
Honey Badger's picture

The Bank of Israel buys stocks with some of its reserves.  Could that be what is headed our way?

Thu, 12/12/2013 - 11:39 | 4239593 verum quod lies
verum quod lies's picture

The beauty of this is that there really is not much in the way of pretense anymore. The frog is now boiled and still in the pot lifelessly floating around in the steam and bubbles. We have the head of the bank of Israel stepping down to take a position as the right hand man of another tribe member who is replacing another tribe member who are all destroying a country headed by a gay sociopath who is not even Constitutionally qualified to even run for president (who, incidentally was put into his current position largely by money funneled to him by tribe members and tribe controlled entities). The kicker is that while this is factually true and now common knowledge there will be without a question one or more people to down vote what was just written merely because they are so brainwashed that the truth makes them respond with furry and instead of attacking their obvious oppressors they attack the messenger; otherwise, I'd expect a great numbers of apologies to Francis Sawyer. I won't be holding my breath; and good luck to all at the frog leg banquet.

Thu, 12/12/2013 - 13:00 | 4239956 Decimus Lunius ...
Decimus Lunius Luvenalis's picture

I'm glad that a person of Jewish descent is being added to the Fed's governance structure.  The heebs have been unfairly under-represented for far too long in that institution.  To think how things would be so much better if only we'd had a couple of Jews running the Fed for the last 100 years. 

Thu, 12/12/2013 - 14:49 | 4240446 AKL
AKL's picture

Fischer was also senior vp at Citibank. This is a very smart guy who has at least worked in banking. I have nothing but respect for him and think the Fed would be lucky to get him.

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