Quote of the Day: Fisher on Inflation

Sayeth the Dallas Fed President:

"We know from centuries of evidence in countless economies, from ancient Rome to today’s Zimbabwe, that running the printing press to pay off today’s bills leads to much worse problems later on. The inflation that results from the flood of money into the economy turns out to be far worse than the fiscal pain those countries hoped to avoid…"

"Inflation is a sinister beast that, if uncaged, devours savings, erodes consumers’ purchasing power, decimates returns on capital, undermines the reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency."

Richard W. Fisher, President and CEO of the Federal Reserve Bank of Dallas
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Fisher has been battling his "8th inning" comments about tightening for several years now. He seems to have put down the pompoms and is seriously discussing what I suspect he understood all along: Inflation is an ever present –and growing — threat.

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Hat tip: Fleck

Previously:
The Longest 8th Inning in the History of Baseball (June 2006)  http://bigpicture.typepad.com/comments/2006/02/the_longest_8th.html

Source:
Storms on the Horizon
Richard W. Fisher
Remarks before the Commonwealth Club of California
San Francisco, California, May 28, 2008
http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm

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What's been said:

Discussions found on the web:
  1. James Bednar commented on Jun 3

    Inflation is a sinister beast that, if uncaged, devours savings…

    Reads like Revelation.

    And when he opened the third seal, I heard the third living creature saying, Come. And I saw, and behold, a black horse; and he that sat thereon had a balance in his hand. And I heard as it were a voice in the midst of the four living creatures saying, A measure of wheat for a shilling, and three measures of barley for a shilling; and the oil and the wine hurt thou not.

  2. Jurgen commented on Jun 3

    Although I agree with todays Zimbabwe as a model of what happens when there is too much inflation I disagree with ancient Rome for the same.

    Any nation that uses the gold standard (or any other solid good that cannot be created on demand) should not have this problem. Governments may be willing to help out their cronies during bad times but they will simply be unable.

  3. Danny commented on Jun 3

    Jurgen,

    The Romans clipped coins or debased the metals they were made out of. So effectively they inflated their currency as well. It is obviously tougher to do under a gold standard, but when government are dying, they will do anything to stick around, even to the detriment of the people they are supposed to serve.

  4. gmork commented on Jun 3

    If Will Durant is to be believed, Ancient Rome ran a huge trade deficit with Ancient China, shipping them gold in exchange for things like silk and spices, possibly even finished goods. By today’s standards the transaction costs must have been unbelievably high, to say nothing of the fact that smack in between Rome and China was an empire antagonistic to both in Persia. But somehow they still managed to do it.

    But thank goodness we’re so much smarter than those Romans, right?

  5. ReturnFreeRisk commented on Jun 3

    Although Fisher has been dissenting lately, he also said that the remedy for inflation was up for debate. UP FOR DEBATE??? stop the presses. what is debatable? If he is the hawk….

  6. Mike M commented on Jun 3

    “[The Federal Reserve] is a sinister beast that, if uncaged, devours savings, erodes consumers’ purchasing power, decimates returns on capital, undermines the reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency.”

  7. Room_641A commented on Jun 3

    This good cop/bad cop thing jumped the shark a long time ago.

  8. Curt commented on Jun 3

    What happen to Kudlow? He is becoming a cheerleader to the economy. How can everyone put off the spike in inflation without realizing the pain it is causing?

  9. michael schumacher commented on Jun 3

    they forgot the following:

    “even though this act of printing to pay off bills now is wrong…most of us will be in another position (ala Mishkin) or dead or just marking time (Warsh) so it really does not matter if we do it now because none of our actions ever has a consequence”

    Ciao
    MS

  10. daveNYC commented on Jun 3

    They need to update the bible for inflation.

    I’m looking forward to some hoocoodanode coming from the Fed soon.

  11. KnotRP commented on Jun 3

    Oh, my….the cage is open. Kitty? Has anyone seen Kitty? Here Kitty Kitty Kitty.

    I agree -they’ve jumped the shark on good/bad cop speeches. It’s like when a bank CEO comes out and
    says they have plenty of liquidity. Methinks thou Fed dost
    protest too much….

  12. Anon commented on Jun 3

    Whosoever controls the volume of money in any country is absolute master of all industry and commerce…
    and when you realize that

    – the entire system is very easily controlled, one way or another, by a few powerful men at the top –
    you will not be told how periods of inflation and depression originate.” …

    James Abram Garfield (19 November 1831 – 19 September 1881) was the 20th President of the United States (1881), and the second U.S. President to be assassinated. Within weeks of releasing this statement President Garfield was assassinated, after only six months and fifteen days in office.

  13. speculator commented on Jun 3

    The government thinks they can have growth with no set backs. They think they can do away with the business cycle. To do that they make credit easy and pump money into the economy. But there are “laws of unintended consequences”. They lead to inflation.

  14. Grodge commented on Jun 3

    How does deflation in housing counter inflation in commodities?

    Those of us who own our homes get burned (twice), but doesn’t the decrease cost of housing for others offset the rising prices in other asset classes?

    I’m no economist, I was just wondering how it’s figured.

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