Fiscal Policy. Oy! (With Reference to Ben Bernanke, Ken Arrow, Thomas Jefferson, William Shakespeare and the Oracle of Omaha) via Dallas Fed

Speech by Richard W. Fisher

Thank you, Ken (Simonson). I am delighted that the National Association for Business Economics (NABE) has chosen the Dallas Fed’s Houston Branch as the venue for this meeting on the oil and gas boom as a possible engine for “Reigniting the Economy.” As you will shortly hear from my Dallas Fed colleague, Mine Yücel; my wise old colleague from my days at Treasury in the 1970s, Phil Verleger; the incoming chairman of our San Antonio Branch, Curt Anastasio; and others, this is an intriguing proposition. The technical and entrepreneurial genius of Houston and Texas is playing a key role in unlocking our nation’s energy potential. Indeed, there are many here in Texas and abroad—in places as distant as Illinois, Michigan and New York—who argue that reigniting their local economies and the nation’s economy calls for more “Texification,” above and beyond the frontiers of energy.

But I am not here today to discuss oil and gas or engage in “Texas brag.” I have been asked to provide a broader perspective on the nation’s economic and monetary policy.

Current Predicament of Monetary Policy: A Grand Experiment
I’ll begin with a summary of the current predicament of monetary policy.

The Federal Reserve has undertaken a grand experiment to reignite the economy through unprecedented monetary accommodation. We cut to zero the base rate that anchors the yield curve and have pursued a policy aimed at driving rates throughout the curve to historic lows by buying Treasuries and mortgage-backed securities (MBS). Our portfolio totals about $3 trillion, which we have recently been expanding at a rate of $85 billion per month.

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