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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

St. Louis Fed Pres Bullard

Posted by WARREN MOSLER on August 28th, 2009

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Bullard is indicating rates should be left low until the Fed’s balance sheet is reduced.

This would mean longer rates would likely go higher before the Fed allows short rates to rise.

(It also shows he’s very confused on monetary operations but that’s a different issue.)

Fed officials say must not ignore exit policy

By Alister Bull

St. Louis Federal Reserve Bank President James Bullard said the central bank would need to think about scaling back its economic support in the months ahead, while Richmond Fed chief Jeffrey Lacker said it should weigh whether to carry through with all of its current stimulus plans.

“As we head to 2010, the Fed will shift its focus to implementing an exit strategy in order to avoid any potential inflation threats to the economy,” Bullard said in prepared remarks.

“Monetary policy is still very accommodative and the (Fed) intends to keep the fed funds target near zero for an extended period,” he said, according to a summary of his presentation on the economic outlook at the College of Business at the University of Arkansas-Little Rock.

Bullard emphasized that the exit ought to mean allowing the Fed balance sheet to shrink, perhaps by selling assets that it purchased this year to counter the worst recession since the Great Depression, rather than speedy rate hikes.


4 Responses to “St. Louis Fed Pres Bullard”

  1. CJ Maloney Says:

    To think that the same brainless fools who got us into this mess in the first place are going to steer the economy out of it – by using the very same methods that got us into it – requires far more faith than I can muster.

    What we need is to take away from these people the power to arbitrarily set prices (in this case for interest rates) and give it back to the people. In other words, allow the working masses, on a free market, to determine what interest rates will be. Central planning doesn’t work, in fact, there is no such thing as economic “planning”, these PhD addled fools are introducing economic chaos.


  2. warren mosler Says:

    with the fed the monopoly supplier of net reserves they are necessarily price setter as a point of logic, so we’re stuck with that. no such thing as market determining the fed funds rate


  3. Winslow R. Says:

    Ouch! After a brief blip up in the first few weeks of August (due to nonbank transfers to the banking sector) this week shows a fresh decline. Cynically, MBS purchases better start pushing down rates in earnest or stock market needs to extend gains. I just don’t see any other channel stepping up (including automatic stabilizers/stimulus spending – except for cash for clunkers). Next step – federal bailout of California? Summers must be sleepless.

    1 Bank credit 9,016.3 9,297.7 9,316.5 9,295.6 9,263.9 9,351.0 9,342.3 9,260.0 9,216.3 9,236.2 9,241.0 9,200.8


  4. Winslow R. Says:

    We’ve talked about Japan’s limited ability to change its structural problems a few years back. Perhaps it is all about to change. So far, you’ve been right, we’ve taken Japan’s path.

    “It’s revolutionary,” said Tomoaki Iwai, a political science professor at Tokyo’s Nihon University. “It’s the first real change of government” Japan has had in six decades.


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