So Much For The Republic: Plosser Admits Fed Is Now In The "Fiscal Policy" Business
Philly Fed dissenter and rebel Charles Plosser, said something stunning during a Q&A session at the Zell/Lurie Real Estate Center at Wharton. When asked what he thought of Operation Twist, his response: "it is fiscal, not monetary policy, and does not have much credibility ....Treasury debt issuance could undo much of the effect of the Fed's attempt to lower borrowing costs, known as 'Operation Twist', Plosser said. "It doesn't have a whole lot of credibility attached to it." While we have no doubt that Twist has no credibility and both the Fed and the market will figure this weakest link out within a month, forcing the Fed to proceed, over the 3 dissenters pseudo-dead bodies, with much more LSAP, it is somewhat shocking to hear confirmation that the Fed itself now sees its duties as those of the legislative, or the body tasked with writing America's laws and funding required amounts of money via debt issuance. Granted, it is well known that America's congress is now in a state of perpetual impasse with no further stimulus likely to come as long as the GOP controls the Congress and Obama is president. But at least the American people (deserving as they are of their representatives and president) pick those in congress. The last time we checked, the "popular election" of the Fed chairman is not in the purvey of the US constitution, and the only capacity given to public representatives is to veto his nomination. Everything else is decided in a banker-filled conclave. Which then begs the question: has the Fed admitted the archaic concept of the US republic is now over and done with?
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