A nice acknowledgement by Richard Fisher, President and CEO of the Federal Reserve Bank of Dallas, of what they at the Fed do not know:
We are blessed at the Fed with sophisticated econometric models and superb analysts. We can easily conjure up plausible theories as to what we will do when it comes to our next tack or eventually reversing course. The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy. Nobody really knows what will work to get the economy back on course. And nobody—in fact, no central bank anywhere on the planet—has the experience of successfully navigating a return home from the place in which we now find ourselves. No central bank—not, at least, the Federal Reserve—has ever been on this cruise before.
Here Fisher is paging Dr. Higgs and the regime uncertainty thesis by quoting a “respected” CEO:
“We are in ‘stall mode,’ stuck like Velcro, until the fog of uncertainty surrounding fiscal policy and the debacle in Europe lifts.”
And finally, challenging the dual mandate of the Fed:
I would point out to those who reacted with some invective to the committee’s decision, especially those from political corners, that it was the Congress that gave the Fed its dual mandate. That very same Congress is doing nothing to motivate business to expand and put people back to work. Our operating charter calls for us to conduct policy aimed at achieving full employment in addition to preserving price stability. A future Congress might restrict us to a single mandate—like other central banks in the world operate under—focused solely on price stability. But unless or until that is done, we have to deliver on what the American people, as conveyed by their elected representatives, expect of us.
The rest here is very much worth a careful read. I’ve been in favor of using monetary policy (if properly done) in the recent past to help with our economic troubles. Fisher gives us something to think about in terms of the limits of monetary policy, the problem of the Fed’s dual mandate, and the need to get our fiscal house in order.