Looking Ahead – Who’s on the FOMC in 2012?
Nouriel and other clear-thinking economists often talk about the Three Stooges at the Fed, Kocherlakota, Fisher, and Plosser (Minnesota, Dallas, Philadelphia), who have probably hampered monetary policy this year. Kockerlakota and Plosser are good economists, but with degrees from Chicago, their intellectual and philosophical perspective renders them incapable of understanding the U.S.’s economic situation, including what got us here and what’s needed from monetary and fiscal policy to improve it. Fisher doesn’t have a higher degree in economics and is a businessman/political operative/trade rep – definitely the weakest link on the show. They’re gone next year (well, they still get to discuss, but not vote), along with superdove Evans (Chicago), replaced by Lacker (Richmond) who will be the only real hawk as Lockhart (Atlanta), Pianalto (Cleveland), and Williams (San Francisco) take the remaining places.
Dudley, Tarullo, and Yellen are not permanently dovish by nature, but like the three regional governors above, these members of the board of governors understand the liquidity trap and the need for unconventional measures. Sarah Bloom Raskin is a lawyer amd Elizabeth Duke a community banker, they’re weak in economic policy and will probably go with the majority (it would be nice to see them use their experience to tackle the TBTF megabanks, but I won’t hold my breath).
All in all, a better, higher-level Fed next year IMO, though the risk as always is mistaking a temporary good patch for the real thing, when we are still in a balance sheet recession, post-financial-crisis economy. But chances of QE3 will certainly rise in 2012, and we may see further aggressive easing – still possible even in the ZIRP environment, e.g. inflation targeting, money-supply expansion, negative interest rates, more direct asset reflation.
BTW Tim Duy yesterday savagely thrashed Richard Fisher – but nothing personal, just well reasoned economics. Enjoy!
Comments are closed.
