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Two inflation hawks to leave Fed

Charles Plosser and Richard Fisher, presidents of the Philadelphia and Dallas Feds, respectively, announced plans to retire, leaving the Fed in the hands of inflation doves who seemingly have no fear of inflation.

Both men long have cautioned against excessive money creation by the Fed and have even warned that it will result in price inflation, but price inflation has yet failed to materialize significantly and the two have been marginalized.

At the most recent Fed policy-making committee meeting, both argued that the Fed was not tapering its quantitative easing program fast enough.  Still, the members voted to reduce the amount of quantitative easing by only $5 billion, whereas the monthly reductions have been $10 billion since tapering was announced.

Originally, tapering of $10 billion monthly was to end QE in October, but with last month’s being a $5 billion reduction a question remains about when the tapering will end.  At $5 billion a month, it will not end until December.

In 2008, Plosser and Fisher voted reluctantly against instituting QE, with the former arguing since then about the efficacy of the massive money creation program.

Fisher recently warned that the Fed is “at risk of doing what the Fed has too often done: overstaying our welcome by staying too loose too long.”  He has also said that the Fed was encouraging excessive speculation in financial markets, risking a new round of bubbles.

Some analysts argue that there are two bubbles in the financial markets: the stock market and the Treasury bond market.

The resignations will leave the Fed in the hands of younger persons who in their lifetimes have not only experienced little negative results from inflation but also can point to QE as having “saved the world’s economy.”  They will not be reluctant to employ still more monetary policies as the economy fails to meet their expectations.

As noted in Foundation for massive worldwide inflation, the EU, China and Japan are setting the stage for massive monetary inflation.  The US is now shoring up its foundation for the same.

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