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Dallas Fed President on Why He Opposed QE3

Richard Fisher says we don’t know much about why the economy is stalling, but we do know one thing: liquidity is not the problem. Our engine room is already flush with $1.6 trillion in excess private bank reserves owned by the banking sector and held by the 12 Federal Reserve Banks. Trillions more are sitting […]

Richard Fisher says we don’t know much about why the economy is stalling, but we do know one thing: liquidity is not the problem.

Our engine room is already flush with $1.6 trillion in excess private bank reserves owned by the banking sector and held by the 12 Federal Reserve Banks. Trillions more are sitting on the sidelines in corporate coffers. On top of all that, a significant amount of underemployed cash—or fuel for investment—is burning a hole in the pockets of money market funds and other nondepository financial operators. This begs the question: Why would the Fed provision to shovel billions in additional liquidity into the economy’s boiler when so much is presently lying fallow?

Despite his opposition, he gives generally high marks to how the Fed has handled the crisis. If you’re looking for the source of the present economic stall, he says, look at your local member of Congress:

[T]hey fight, bicker and do nothing but sail about aimlessly, debauching the nation’s income statement and balance sheet with spending programs they never figure out how to finance.

I am tempted to draw upon the hackneyed comparison that likens our dissolute Congress to drunken sailors. But patriots among you might take umbrage, noting that a comparison with Congress in this case might be deemed an insult to drunken sailors.

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