Jim Sinclair’s Commentary
As push comes to shove on the deceleration of business activity there will be NO hawks on the Fed. That you can be sure of. The following are a few comments from my former partner Yra Harris.
Notes From Underground: FOMC Minutes (Upon Further Review)
Tonight will be all quick hitters as the big news is sparse, to say the least. The Fed released the minutes of the September FOMC meeting. Besides discussing the idea of QE3, the most interesting read was that Fisher was not as hawkish as his NO VOTE seemed. This makes sense as his speeches this week have been pretty DOVISH and I had thought that he was contradicting himself.
In the minutes, it summarizes Fisher’s vote in the following: “ANY REDUCTION IN LONG-TERM TREASURY RATES RESULTING FROM THIS POLICY ACTION WOULD LIKELY LEAD TO FURTHER HOARDING BY SAVERS, WITH COUNTERPRODUCTIVE RESULTS ON BUSINESS AND CONSUMER CONFIDENCE AND SPENDING BEHAVIORS.” President Fisher believed that policymakers should focus “ON IMPROVING THE MONETARY POLICY TRANSMISSION MECHANISM, PARTICULARLY WITH REGARD TO THE ACTIVITY OF COMMUNITY BANKS, WHICH ARE VITAL TO SMALL BUSINESS LENDING AND JOB CREATION.” Therefore, Richard Fisher is not the hawk he has been labeled.
He is not opposed to the FED being aggressive. He just differs on the mechanism for he believes QE and the TWIST to be inefficient promoters of credit creation. In the FOMC MINUTES we learn that the interest on excess reserves (IOER) rate was not lowered because some voters thought … “that a recent change in deposit insurance effectively reduced the return that banks were receiving on balance.” The FED is merely subsidizing the banks through the IOER interest payments to reduce the burden from increased fees from the FDIC. Why doesn’t the FED just give its earnings directly to the FDIC and remove all the middlemen? At the end of the day it seems that the hawks on the FOMC are a figment of one’s imagination.