Richard Fisher's Speech

Yesterday, the Round Rock Chamber of Commerce hosted their monthly meeting by having Richard Fisher, the President of the Dallas Federal Reserve Bank and a member of the Federal Open Market Committee (which sets Fed monetary policy) as a speaker.  I was in attendance.

In his speech, Mr. Fisher said that the economy is on the path to recovery and he would not be surprised if GDP (Growth Domestic Product, which measures the U.S. economic productivity) growth was as high as 4% in the last half of the year.

Personally I don’t see this.  Mr. Fisher admitted that the Fed had provided plenty of liquidity to the system.  That banks had plenty of money to loan out, but loans weren’t occurring due to too many unknowns for businesses.  But as some of these things settled down, then economic activity should pick up.  He admitted that our economic activity is 70% consumption, so basically he is saying consumption should pick up.

If consumption picks up, then business will want to hire more.  Thus reducing unemployment and causing both consumers and businesses to want to borrow more.

Again I don’t see this.  What I see is that baby boomers are getting older and more and more are reaching retirement age.  When people retire, they spend less.  Also the financial crisis has caused many people to realize they need to get their own finances in order.  As a whole, the country is paying down its credit card and automobile debts and spending less.

Plus a whole lot of people are removed from the credit system due to foreclosures or personal bankruptcies or just due to increased lending standards.

I simply don’t see consumption going up, therefore I don’t see any increase in lending or any increase economic productivity occurring.  My prediction is that GDP will be lower the next 6 months.  This prediction, of course, is based on the Federal Reserve not printing more money and artificially inflating all of our numbers including GDP numbers.  Unfortunately I have to present that caveat because I think that is what is most likely to occur.

Anyway his speech left me wondering.  Can the Fed not analyze the same way I do?  Do they lack the same information that I have?  Or do they have some other agenda that would cause them to misrepresent this information?

Richard Fisher is a very intelligent man.  He went to Harvard and to Stanford.  I’m sure he can analyze data as well as me.  It’s hard to believe they don’t have the information as I’m not privy to near the information they have access to.  Nor do I have the research manpower that they have.

Therefore I can only conclude that they know what is the truth, but have some other agenda.

Of course, they will just tell you that I can’t analyze data accurately.  And that I simply don’t understand.

We shall see.