23 May 2009

Fed Official: "Don’t Monetize the Debt"

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So argues Dallas Fed president Richard Fisher in today’s WSJ. Apparently the Chinese have been reading my blog (though from my traffic reports, presumably only 0.00001% of them), because the WSJ reports:

[Fisher] has just returned from a trip to China, where “senior officials of the Chinese government grill[ed] me about whether or not we are going to monetize the actions of our legislature.” He adds, “I must have been asked about that a hundred times in China.”

Although Fisher is pretty cool for a Fed official, this part cracked me up:

He surprises me by siding with the deflation hawks. “I don’t think that’s the risk right now.” Why? One factor influencing his view is the Dallas Fed’s “trim mean calculation,” which looks at price changes of more than 180 items and excludes the extremes. Dallas researchers have found that “the price increases are less and less. Ex-energy, ex-food, ex-tobacco you’ve got some mild deflation here and no inflation in the [broader] headline index.”

I love how Fed officials take out energy and food prices and then talk about what a great job they’re doing in stabilizing “the price level.”

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