U.S. companies “have the resources they need to do what we want them to do–in this case, invest in job creation,” Federal Reserve Bank of Dallas President Richard Fisher said. “But as long as that fence of uncertainty is in place, they will not be able to perform,” the policy maker said.
The central banker did not address the monetary policy outlook, but he did say that when it comes to Federal Reserve bond buying “quantitative easing is a necessary but insufficient tool to spark job creation.” He added, “employers will not deploy the cheap and abundant capital on hand toward job creation while there is so much uncertainty surrounding final demand for the goods and services they sell.”
Now Fisher, who’s been fantastic on financial reform, has been dubious of the Bernanke Fed’s quantitative easing strategy. Yet the central banks has slowly and clumsily been making its way toward a rule-based monetary policy system that would address Fisher’s concerns. As Salam notes:
What is odd here is that uncertainty surrounding final demand for goods and services is arguably best addressed by the kind of nominal GDP level target that Mark Carney, governor of the Bank of Canada, has all but endorsed. Regulatory and tax-related uncertainties are undoubtedly important, but maintaining steady nominal GDP growth is arguably the most direct way to address the anxieties of employers that Fisher rightly identifies as a barrier to investment.
Ding, ding, ding! I think what Fisher needs to better understand are the constraints on NGDP level targeting and why it wouldn’t be just Keynesian license to print money to juice growth.