Does the Fed have a firm understanding of money expansion and its consequences?
*UBS Market Commentary, featuring Richard Fisher, Sept. 28, 2011:
''Yesterday, [Dallas Fed President Richard] Fisher stepped to the
podium again. Here, his purpose was to explain and clarify why he
dissented on Operation Twist. Unfortunately, he is hampered a bit
by respecting the yet to be disclosed minutes of the meeting.
Perhaps he will re-visit the topic more fully after the minutes are
released. He did begin yesterday's speech with a really terrific
analogy. As he started, a large photo was shown of a sign outside
the Jan Mayen Arctic Weather Station. As the picture loomed
above, Fisher explained as follows:
Jan Mayen is a desolate volcanic island located about 600 miles west of
Norway's North Cape. It is the home of a meteorological and
communications station manned in the harshest of winters by 17 hearty
members of the Norwegian Armed Forces. If you read Tom Clancy's
Hunt for Red October, you would know it as 'Loran-C,' a NATO tracking
and transmissions station. In the video game Tomb Raider:
Underworld, Lara Croft visits Jan Mayen in search of Thor's Hammer,
considered the most awesome of weapons in Norse mythology, capable of
leveling mountains and performing the most heroic feats. My brother
Mike recently visited this station on Jan Mayen. This is the sign
that greeted him.
In norsk, it reads as follows:
'Theory is when you understand everything, but nothing works.'
'Practice is when everything works, but nobody understands why.'
'At this station, theory and practice are united, so nothing works and
nobody understands why.''
My wry brother implied that this about summed it up for monetary
policy. Drawing on theory and practice, the 17 members of the
Federal Open Market Committee (FOMC) have been working in the harshest
economic environment to harness monetary theory and lessons learned
from practice to revive the economy and job creation without forsaking
our commitment to maintaining price stability. But the
committee's policy has yet to show evidence of working and nobody seems
to quite understand why.''
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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