Cashin On Fisher's Fiscal Fortitude

Tyler Durden's picture

Reflecting on yesterday's monetary-policy-hope-driven rally, UBS' Art Cashin prefers to focus on Richard Fisher's very frank (and succinct) speech on the limits of monetary policy and the importance of fiscal policy.  Urging everyone to read it, and send it to your Congressman and Senators, he reminds us that Fisher is the only Fed policymaker to have been a banker and a money manager.


UBS' Art Cashin: Another Great Speech - Dallas Fed President, Richard Fisher was in Scotland Tuesday morning. He was speaking at St. Andrews as part of the commemoration of that institution’s 600th Birthday (and as he cleverly slipped in - the 129th birthday of John Maynard Keynes and the 289th anniversary of the baptism of Adam Smith). Mr. Fisher is renowned for his candor and he’s the only Fed policymaker to have been a banker and a money manager. If you can access it, please read the whole thing. Once you’ve read it send a copy to your Congressman and to your two U.S. Senators. Here’s a portion to whet your appetite:

The Limits of Monetary Policy and the Importance of Fiscal Policy


Here is the rub. As mentioned, the FOMC sets monetary policy for the nation, for all 50 states—its influence is uniform across America. The same rate of interest is charged on bank loans to businesses and individuals in Texas as is charged New Yorkers or the good people of Illinois or Californians; Texans pay the same rates on mortgages and so on. Why is it that the Texas economy has radically outperformed the rest of the states? A cheap answer is to revert to the hackneyed argument that Texas has oil and gas. It is true that we produce as much oil as Norway and almost as much natural gas as Canada. And we have some 60 percent of the refineries of the United States. But remember that the numbers I showed you are employment numbers. Only 2 percent of employment in Texas is directly generated by oil and gas and mining and related services. We are grateful that we are energy rich. But we are a diversified economy not unlike the United States, where business and financial services, health care, travel and leisure activities and education account for similar portions of our workforce. Why, then, do we outperform the rest of the United States?


To me, the answer is obvious: We have state and local governments whose tax, spending and regulatory policies are oriented toward job creation. We have the same monetary policy as all the rest; our income is taxed at the same federal tax rate; and we are equally impacted by Washington’s tax, spending and regulatory policies. But we have better fiscal policy at the state level. We have no state income tax; we are a right-to-work state; we have state and local governments that, under both Democratic and Republican leadership, have for decades assiduously courted job creators—so much so that we have even outperformed the job creation of most every other major industrialized economy worldwide, as shown by the previous slide.


Whither Monetary Policy?


Now, back to the hue and cry of financial markets, and the question of further monetary accommodation. Interest rates are at record lows. Trillions of dollars are sitting on the sidelines, not being used for job creation.


We know that in areas of the country where fiscal and regulatory policy incents businesses to expand—Texas is the most prominent of those places—easy money is more likely to be put to work than in places where government policy retards job creation. During the next few weeks as I contemplate the future course of monetary policy, I will be asking myself what good would it do to buy more mortgage-backed securities or more Treasuries when we have so much money sitting on the sidelines and yet have no sense of direction for the future of the federal government’s tax and spending policy. And with the president’s health care legislation awaiting resolution in the Supreme Court, we also know that no business can budget its personnel costs until that case is decided. If job-creating businesses have no idea what their taxes will be, are clueless about how federal spending will impact their customers or their own businesses and cannot budget personnel costs—all on top of concerns about the risk to final demand posed by the imbroglio in Europe and slowing growth in emerging-market countries—how could additional monetary policy be stimulative?


A good theoretical macroeconomist can acknowledge that a great deal of liquidity is, indeed, going unused at present. They might likely argue that further monetary accommodation would raise inflationary expectations by magnifying the fear that the Fed and other monetary authorities are hell-bent on expanding their balance sheets and, consequently, the money supply so dramatically that inflation will inevitably follow. The result, the good macroeconomist would deduce, would be salutary: It would scare money out of businesses’ pockets and into job expansion and would lead individuals to conclude they better spend their money today rather than have it depreciated by inflation tomorrow, thus pumping up consumption and final demand.


I beg to differ. I would argue that this would represent a form of piling on the already enormous uncertainty and angst that businesses face with our reckless fiscal policy. To me, that would be the road to perdition for the Federal Reserve. There is in the marketplace a lingering fear that the Fed has already expanded its balance sheet to its stretching point and that an exit strategy, though articulated, remains theoretical and untested in practice.


And there is a growing sense that we are unwittingly, or worse, deliberately, monetizing the wayward ways of Congress. I believe that were we to go down the path to further accommodation at this juncture, we would not simply be pushing on a string but would be viewed as an accomplice to the mischief that has become synonymous with Washington.

Well said, Mr. Fisher! Very well said.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Looney's picture


slaughterer's picture


The Monkey's picture

Nice, shorts are dropping like a rock this AM. Hopefully, this continues for a while.

ndotken's picture

"Once you’ve read it send a copy to your Congressman and to your two U.S. Senators."

I'm really not sure what good that will do since those criminals in Congress obviously don't give a damn about doing the right thing .....

John Law Lives's picture

"there is a growing sense that we are unwittingly, or worse, deliberately, monetizing the wayward ways of Congress."

Ron Paul pointed this out LONG ago.

LawsofPhysics's picture

Since 1913, the elites always knew this would be the case.  The debts can never be paid, period.  From the standpoint of both capital and resources, we have been borrowing from the future.  Print all the capital you fucking want, it will continue to become exponentially more difficult to extract those future resources.  This is especially true with the fascism going on everywhere and the failure to allow real consequences for bad behavior.  Fuck the paper-pushers, they will be the undoing of us all, same as it ever fucking was.

mcguire's picture

sounds better if you dont use the word "fucking" so much..

Global Hunter's picture

thumbs down "fucking this" and "fucking that" is an accurate way to convey just how fucked up things are, how fucked these perverted banksters and deviant politicians are and just how fucked we are all for letting this happen.  If you can't see that you are fucked.

TheCanadianAustrian's picture

But fucking is a very cromulent word.

CClarity's picture

VERY cromulent!  Embiggened even.

smb12321's picture

But if you recall the Clinton "surplus" years (debt was a relatively benign $5 T  - less than a third of todays) there was much talk of paying down the debt.  At the time, energy was cheap, computers were spurring productivity rates higher, the market was maxing out and things looked rosy.  But folks were - at least for a few moments - talking about paying down the debt.

oldman's picture


But, but----but Clinton like the word 'suck"

so how did he get into the conversation?

having fun    om

earleflorida's picture

clinton's good years came at the expense of future generations, period!

he passed NAFTA which evolved into CAFTA under Bush# 43

it was a boom for american industrial/ manufacturing sectors in the short term --- but, as all good-intention trade-agreements finally peter-out without a realistic visionary plan, we see visually the devastation of our own country for the benefit of others?

the bust of industrial/ manufacturing to ~10% of the U.S. Economy has devastated good paying jobs. Sadly, we have a service orientated economy currently at 90% and growing.

This is why clinton balanced the budget, or it very well could have been bush #41 if he had kept his mouth shut about "Taxes".

Ps. Clinton spearheaded the U.S./ China's fast-track [endorsement] acceptance into the WTO [12/11/01 via Bush #43 adm.].


Whatta's picture

Yeah, not much new ground plowed there. Just driving home the same shit.

azzhatter's picture

there is little new ground to be plowed. The most fields are between the ears of the sheeple

Texas Ginslinger's picture

off topic; the Baltic Dry Index seems to be stuck at 904.

Has been there for several days, as far as I can tell.

Frozen in place like the short term Greek bonds..??

LawsofPhysics's picture

Simple, the "markets" are no longer relevant as there is no real market.  Barter at an all time high around the world (hell just look at e-bay traffic lately).  Ignore the paper bullshit and just remember, when real goods and services stop crossing boarders, troops will.

This has been the way for over 2000 years.

Temporalist's picture

What about the ebay traffic?  Is there an article or link to which you are referring?

Sudden Debt's picture

and if the BDI is 6 months ahead of the market... we're in for a serious drop soon...


Turd Ferguson's picture

"a growing sense"
What fucking planet do these idiots live on?

SilverTree's picture

Just connect the dots Turd!

boogerbently's picture

How about Bernanke gives US the QE money and GS/MS/JPM.... has to pay it back ?

bigdumbnugly's picture

I believe that were we to go down the path to further accommodation at this juncture, we would not simply be pushing on a string but would be viewed as an accomplice to the mischief that has become synonymous with Washington.


somehow mischief just doesn't seem to be an apt enough description.

Larry Darrell's picture

So let me get this straight.

The problem isn't that they are DELIBERATELY "monetizing the wayward ways of Congress."

The problem is that there is a "growing sense" of this fact.  In otherwords, this prick (Fisher) is worried about the masses waking up to this fact?

LULZBank's picture

Or maybe he means, the problem is the Oil supplies are declining and (Peak Oil) and there isisnt anything to absorb or to put up as collateral for the "Oil backed" currencies.

Bicycle Repairman's picture

The fractional reserve system requires ever increasing debt.  You won't borrow, so Congress does.  The FED prints the money Congress borrows.  They work hand in glove and have done so for 100 years.  Who is Fisher trying to kid?

slewie the pi-rat's picture

listen,  BiChez (you too mrT.urd):  if tyler and artC, probably both pleasantly warmed by the sunrise, are telling us to read this and pay attention, maybe we oughtta pay attention

this is the same point that slewie was trying to insinuate into the masses, here, last summer during tyler's chikckelLittleAct leading up to the debtCeiling mega-shitsky boning of weThePeople by congo (and rPaul, too, btw, unless youR fuking brain-dead)

to wit:  the USA is outta control, fiscally, and theCongo better stop looking out for the criminals in sunday-school-teacher garb who are hanging them bags of money every day, but the interest of thePeople, b/c the banking system will not continue to function for too much longer if they do not

and yes, panic and a wholesale shit-show are resultants of perceptions and how the digestion of same by humanoids proceeds:  to the bank and the mailbox?  or to the gun cabinet?

these chicken-littles will come home to roost;  the fiat-bankster "economics" does have its theoretical aspects, and fisher, tyler, the chairangel artC, and slewie all understand theses aspects or are pretending to, in my case, ok?

to wit, in slewienomics: QE, ZIRP, sterilization of CTRL+Pand re-electing the same captured interests over & over = can-kicking

these are a few critical points in any system which cycles and grows;  in the US system, this is one of the most important of these systemically critical points

the facts of the goobermint's capture and subsequent insanities and the deep sleep of the sheep, especially here on zH, as these comments continue to illustrate so clearly, does not negate the criticalities of the economic and political system to which, for better/worse, we are tethered till death do us part

whom are you trying to kid?

according to tyleresque and pi-radical thought, theory, and wisdom, the political consciousness of the bolggers here < a fifth grader's

why?  b/c the vast majority of zeroHeads get their political "training" from the family, public school, and TV, with the last of those selcetively reinforcing the wortst aspects of the first two, ok?

you really do NOT belong here on zH at this point unless you are willing to arc the TV offa a tall structure

you will not be able to begin to understand the best of what your parents and teachers tried to give you, unless and until you do so

yes, you are psychologically bound by yer TV conditioning

deal with it, now, please!  until you do, you will remain in the situ where you are perfectly willing to sell your birthrights for a bowl of pottage + the pleasure of being ass-fucked while getting yer check from the mail-box

take the televisions and MSM programming outta your homes and away from you and your families NOW, b/c until you do, you are part of the problem, not part of the small, "non-elite" groups who understandand and are forming up now to be part of the array of possible solutions

a bunch of mechanically-programmed humanoid bots running around with guns thinking the TV is telling them what to do and whom to shoot, hang, or otherwise dispose of isn't the answer even fightClub proposed, now, izzit?

since tyler seems to enjoy that big MSM dick up his beostted ass, and has gone to predicidting  QEs and their market effects, rather than helping the people he has attracted complete step1 in  the proper (for this site) appraoch to theReal, slewie and others will continue to do the heavy lifting while he pretends he can still be a "winner" in the eyes of the MSM and their lack-keys

after all, tyler can't be expected to bite the hands that feed him for producing this soap-opera

can he?

smb12321's picture

Please get a drink or a lay - which will better calm your shattered nerves.

slewie the pi-rat's picture

you have once again displayed yer level of understanding of the most important issues of this election year!

wlile yer here, or pretending to be, why not share with the readerhip when it was that you stopped imbibimg the selective conditioning of TV and the MSM, you absolutely achetypal mononic shitheaded asswipe?

i'll wait...

Bonesetter Brown's picture

Preach it.  Turned the TV off in 2004 and it changed my life. 

oldman's picture


Bravo, bravissimo!!!!!!!!!!!!!!!!!!!

Thanks, pi-rat for your faith and inspiration. This oldman has been sitting here all morning thinking about how to say what you wrote above------your elegance in essay far excedes my meager lack of facility with language, and you saved me a lot of work as well.

I sat here considering, also, the un-employed and how the warnings of the Reuther brother in the 50's and Harry Bridges in the 60's regarding trading employment for a vested interest in the an automated system requiring fewer employees has come to be. Wondering how to express the the reality of a species whose only problem remains to be how do we share the goods and services of the beautiful capitalist system---which this oldman is extremely comfortable with----how do we put all those who want to work on the job with so much productivity from the machines. How do you get by the slavemasters, Koch boys, Europe's Lords of the Manor, etc who loe **&&^%$%^&(*(&*^

janus's picture


dr. janus says -- keep takin/tokin/drinkin whatever it is you're t/t/d, and then double it.

good show.

slewie's caught fire.

one thing: give Tyler a break...we will all have greater responsibilities soon -- such is the travail of growth.  furthermore, tyler can't be expected to fetter himself (nor the rest of us who have graduated from kindergarten) with the needs of the neophytes -- let them read the archives.  

onward and upward, mi amigo!

we're not scourin rehab meetins anymore, after all



Matt's picture

Bicycle Repairman:

"The fractional reserve system requires ever increasing debt.  You won't borrow, so Congress does.  The FED prints the money Congress borrows.  They work hand in glove and have done so for 100 years.  Who is Fisher trying to kid?"


I think this is incorrect. The fractional reserve system only requires ever increasing debt when combined with the Keynesian philosophy that every year must be a growth year, that recessions are somehow 'evil'. That, combined with excessive leverage and gambling by those seeking big bonuses. The system survived contractions in the money supply before these things came to pass.

EDIT: plus perpetual government deficits, which are part of the Keynesian thinking.

Bicycle Repairman's picture

What happens to debt, leverage and deriviatives, if deflation occurs?

slewie the pi-rat's picture

dude!  snap out of it!

this whole effort by fisher, artC, and tyler is about Conress's responsiblities under theLaw!

too easy for ya?

Bicycle Repairman's picture

The Law.  You mean like that "Magna Carta" stuff they already flushed?  That Law?

slewie the pi-rat's picture

careful here, ok, matt?

this isn't about arguing the fine points of keynsianism or fractional reserve bankstering, or fiat bankstering

it is about fiscal policy run amuck and trying to get people to focus on the problem and the most obvious first step in approaching it, intelligently (altho arcing the TV off a tall struncture must come first individually, according to fightClub)

you can't engage leo in these side-shows so you now wanna straingten out bike_man?

this piece is about theCongressional duty to approve the budget and set the fiscal course of the unitedStatesOfAmerica and the need for fiscal forititude

if you think fisher and artC and tyler wanted this to lead to i discussion of  fractional reserve or keynesian philosophy, may i suggest that you are, somehow, deluded

no, this isn't as much fun as pretending keynesianism can be understood better if people just listen to you

>>this is about theConstitution and the actual job description which the fuktards like the esteemed rPaul are supposed to be working toward in a MUCH MORE balanced WAY

you were taught this as a child (before you became adult @ 18);  remember?

do you remeber being taught about the rights of property and person?

do you reacall where and how these rights are enshrined?

yep!  all this incredibly boring and obviously irrelevant stuff you were taught is in the same place, too (see >>, above)

however, the MSM isn't focusing on that...?

well, they are in the EU!  those rules to protect certain interest are about to get smoked by other interests unless angela grows a pair, toot sweet

this is polity and politics;  the banksters aren't really ever on any ballots, are they?  and , can you chow me where they are mentioned in the Constituition?  is it in there where "money" is defined for the USA?

please finish any thoughts about how there is nothing higher than humanity in the universe, how evolution will fix everything, and how irrelevant theConstitution has become in the MSM, first, b/c that bullshit ain't in there, either!

i'll wait, ok...  ?

Matt's picture

I'm sorry, did you have a point?

Is your point that every single post under an article should only be under a very narrow range related to the article? 

Who designated you Forum Police, to arbitrarily draw invisible lines about what is on or off topic?

oldman's picture

pi-rat     I can't een express how pleased I a that you are here aong----(keyboard probles--no- letter and no- letter and no 'enter key   I a not sick or drunk or stoned)     Anyway keep going and thanks for kicking so uch troll ass today    you're the captian of this ship             o                                                                                                                                                                                                                                                                                                                           

Jahbulon's picture

Well said indeed.  But it has way too much common sense to be understood by a politician.

orangedrinkandchips's picture

nah, they understand the logic alright....but it's not in THEIR best interests....plain and simple....


It's painfully obvious that Texas is doing it right. Love em or hate em, they are doing it right.

LULZBank's picture

And there is a growing sense that we are unwittingly, or worse, deliberately, monetizing the wayward ways of Congress. I believe that were we to go down the path to further accommodation at this juncture, we would not simply be pushing on a string but would be viewed as an accomplice to the mischief that has become synonymous with Washington.


No Shit.

He forgot to add...

"I swear the only reason we went off the Gold standard and an parasitic banking and financial model was to keep the politicians and feudals in check."


bigwavedave's picture

the problem is the difference between:

1. spend. print. spend. print

2. print. spend. print. spend

FL_Conservative's picture

And, of course, he's not a current voting member.  So who's going to unplug Bernanke's keyboard in Fisher's place?

The Monkey's picture

At least Fisher called out the tactics for what they are. This is one of his more aggressive speeches.

Umh's picture

It may be coincidental or deliberate, but they are monetizing the government debt. I'm pretty sure it's deliberate after all they have been doing so for most of 100 years.

fuu's picture

Don't fed the trolls Art.