Richmond Fed President Can Talk the Talk on Cantillon Effects
Richmond Fed President Lacker dissented from the recent Fed decision, and said in part:
“I also objected to the continuing purchase of agency mortgage-backed securities. If asset purchases are appropriate, the FOMC should confine its purchases to U.S. Treasury securities. Purchasing agency mortgage-backed securities can be expected to reduce borrowing rates for conforming home mortgages by more than it reduces borrowing rates for nonconforming mortgages or for other borrowing sectors, such as small business, autos or unsecured consumer loans. Deliberately tilting the flow of credit to one particular economic sector is an inappropriate role for the Federal Reserve. As stated in the Joint Statement of the Department of Treasury and the Federal Reserve on March 23, 2009, ‘Government decisions to influence the allocation of credit are the province of the fiscal authorities.’
You see how he covered himself in the last sentence? Now maybe Scott Sumner will take the argument seriously, that it’s crazy for the Fed to be encouraging people to buy certain types of houses.
Slightly off topic, but apropos, I thought I’d share my tongue in cheek (and mocking market monetarism to boot) “Stimulative communications policy” scheme I proposed to Sumner, to help him feel a little better about getting spammed by someone impersonating Mark Carney on his blog.
http://www.themoneyillusion.com/?p=18145#comment-214253
Sumner isn’t looking at the macro implications of fake emails.
“I also objected to the continuing purchase of U.S. Treasury securities. If asset purchases are appropriate, the FOMC should confine its purchases to state debt. Purchasing U.S. Treasury securities can be expected to reduce borrowing rates for the federal government by more than it reduces borrowing rates for state governments or for other borrowing sectors, such as small business, autos or unsecured consumer loans. Deliberately tilting the flow of credit to one particular economic sector is an inappropriate role for the Federal Reserve. As stated in the Joint Statement of the Department of Treasury and the Federal Reserve on March 23, 2009, ‘Government decisions to influence the allocation of credit are the province of the fiscal authorities.”
Same logic.
Sheldon Richman, the Richmond Fed, Richard Cantillon? Are you guys seeing the pattern?