Tags: federal reserve | richard fisher | debt | faith

Fed's Fisher: Fiscal 'Ineptitude' Erodes Faith in US Debt

Thursday, 17 October 2013 08:59 AM

Federal Reserve Bank of Dallas President Richard Fisher called on Congress and the White House to bring an end to “fiscal ineptitude,” warning that investors may lose faith in U.S. debt.

Congressional leaders and President Barack Obama should overcome partisanship and adopt a sound federal budget that would prompt companies to take advantage of low borrowing costs created by the Fed’s record accommodation, Fisher, 64, said in the text of a speech to the Economic Club of New York. He will hold a monetary policy vote next year.

“The bond market is beginning to show us the back of its hand,” he said. “The only way for us to achieve sound footing is for our fiscal leaders to make politically disagreeable decisions.”

A deadlock among lawmakers over the federal budget led to a partial government shutdown for more than two weeks and brought the U.S. close to a debt default before a bipartisan agreement.

Following announcement of the agreement, one-month Treasury rates fell 21 basis points to 0.14 percent after touching 0.45 percent, the highest since October 2008, according to data compiled by Bloomberg. The benchmark 10-year note yield fell six basis points to 2.67 percent, Bloomberg Bond Trader data show.

“The nightmare of fiscal indecision and political chicanery that emanates from Washington” reduces the government’s credibility and dilutes Fed stimulus, Fisher said. “Kicking the can down the road for a few months will not solve the pathology of fiscal misfeasance that undermines our economy and threatens our future.”

Economic ‘Blight’

While the Fed “will take all appropriate measures” to ensure market functioning and stability in periods of stress, even asset purchases pushing up the central bank’s balance sheet toward $4 trillion can’t “offset the rot that is destroying our fiscal house and the blight it spreads over our economy.”

Four Fed districts reported slower economic growth while the remaining eight said the expansion held steady amid “uncertainty” because of the U.S. fiscal deadlock, the central bank said in its Beige Book business survey based on reports through Oct. 7.

Growth remained “modest to moderate” as consumer spending maintained gains and business investment grew, the Fed said.

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Federal Reserve Bank of Dallas President Richard Fisher called on Congress and the White House to bring an end to "fiscal ineptitude," warning that investors may lose faith in U.S. debt.
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Thursday, 17 October 2013 08:59 AM
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