Shut Up and Bank

Richard Fisher, the President of the Federal Reserve Bank of Dallas (one of the twelve regional banks that make up our central banking system), must like the sound of his voice, especially when it resonates sensational sound bites that the main stream media can devour.

This week, Fisher gave two speeches that have been commented on by the MSM; one on Tuesday and one today. Usually, regional FRB Presidents operate in obscurity, and for good reason. That obscurity, it seems, has made Fisher lonely because he has taken to using the most outrageous language to warn about inflation and consequently bask in the media glow.

Today, when many sensational headlines warn about the potential for a flu pandemic like the one in 1918 that killed 50 million people, Fisher compared inflation with a flu virus that must be stopped at nearly all costs.

Today, when high gasoline prices have caused the economy to stutter and caused the MSM to write sensational headlines about the 1970s gas shortages, Fisher outrageously compared today’s economy with the US economy of the 1970s when inflation was rampant in all sectors, not just energy. Inflation was rampant because productivity did not exist. Productivity growth was eliminated in the 1970s because of two decades of demand-side management via high taxes, wage-price controls, and high government spending relative to GDP. There is very little to compare from that period and the current period and Fisher should know better.

So, why is he doing this? I can only think of three reasons:

1. He is trying to get a book deal;
2. He wants to be considered for Greenspan’s job and thinks being a fanatical inflation hawk is the only way he’ll get it;
3. He truly believes that our economy is similar to the economy of the 1970s;

I am going to give him the benefit of the doubt and say it’s either one or two above because if it’s number three, he is an ignoramus.

Fisher must know that outside of energy, inflation is running at about 2% per year. Does he know that the Consumer Price Index had a compound annual growth rate of almost 8-percent per year in the 1970s and in three of the ten-years it grew at double digits (1974: 12.3%; 1979: 13.3%; and 1980: 12.5%)?

The 1980s was a dream decade of low inflation and economic growth thanks in large part to the supply side policies of the Reagan Administration. Many who suffered through the 1970s (from the effects of bad policies put in place in the 1960s and 1970s) view the 1980s as a near miracle. The CPI this year (June to June) grew at a 2.99% rate. It averaged 4.72% in the miracle 1980s. That is, inflation is currently almost 37% lower than it was in the miracle decade. Fisher should know better.