Senior US Fed Official Continues To ‘Jawbone’ Markets
US Federal Reserve Vice Chairman Stanley Fischer said Friday that he did not see acute risks to US financial stability in the near future, but emphasized his concern that the central bank’s macro-prudential toolkit is not large and not yet battle tested.
Don’t you wonder what that double speak really means? The Fed has no tools left, it has been ‘battle tested’ and added trillions to its balance sheet that brought virtually no economic growth, no wage growth and fueled a Bull Market in stocks that not if, but when it breaks will be more damaging that the last financial crisis that the government brought on in Y 2007/08.
“Banks are well capitalized and have sizable liquidity buffers, the housing market is not overheated, and borrowing by households and businesses has only begun to pick up after years of decline or very slow growth,” said the central bank official at an event held by the Federal Reserve Bank of Boston.
Mr. Fischer warned that potential shifts of activity away from more regulated to less regulated institutions (who are the less regulated?) could lead to new risks and that the US still lacks a macro-economic toolkit to address a cyclical buildup of financial stability risks.
As the macro-prudential toolkit is very limited, it may be left to monetary policy to curb risks to financial stability, he said, adding that the deployment of monetary policy comes with significant costs. In case you are wondering what “prudential” means in that context, it is “care-taking.” The conclusion is not a comforting one.
Sounds like a grim forecast to me…but couched in Fed speak (terms) that most cannot understand.
Have a terrific weekend.
Paul Ebeling
HeffX-LTN
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