In the event the United States goes off the fiscal cliff, don’t expect the Federal Reserve to shield markets from the worst.
In an interview on the Kudlow Report, the hawkish Dallas Fed President Richard Fisher said he’d resist that kind of intervention.
“I do not see us as that kind of safety net,” he said. “There’s got to be a limit. In committee, we’d have to decide what kind of limit, but there’s got to be a limit.”
That means if Congress plays partisan politics and a big tax hike kicks in, the first quarter turns negative and lawmakers are still scurrying around Washington, unable to reach a deal — don’t expect a massive bond-buying program.
It’s not coming.
Fisher went on to say lawmakers have to step up — and if need be he thinks the Fed should force their hand.
“Fiscal authorities must get their act together,” he said. “We can’t just rely on monetary policy — we can’t have a monetary policy of infinity and beyond.”
“The Fed has been carrying the ball,” Fisher added. “But we can’t carry the ball all by ourselves.”
*It's worth noting in the interview Fisher emphasized that what's outlined above was strictly his opinion and not that of Fed Chairman Ben Bernanke.
“The more we do at the Fed, the more excuses politicians have to do nothing.”
And Fisher is tired of the indecision.
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