Fed Finances Fiscal Spending
In a CNBC interview, Dallas Fed President Richard Fisher was asked whether the Fed was printing money to finance government spending. Steve Liesman, who conducted the interview, did not use the term ‘print money’, but used the more academic term of debt monetization.
Fisher’s comment on the subject:
There’s an enormous program under way that needs to be financed. That’s part of what we are about. [...] We have to be careful not to be perceived as monetizing fiscal largesse to the degree that we create inflationary impulses going forward.
With due respect, it is our understanding that it is not part of the Fed’s mandate to finance government spending. Every hyperinflation in the world has started with a central bank printing money to finance fiscal spending. Wealth cannot be printed.
Fisher likes to quote James Madison, one of the founding fathers, who said, "the circulation confidence is more important circulation money or gold." We could not agree more we don’t need more money, but more confidence. The German finance minister has been saying just that leading to an assault of disapproving comments from American and Japanese policy makers. Germany, though, has experienced hyperinflation twice last century and is well aware of the risks of printing money to finance deficits.
Below, find the full interview.
Axel Merk
Merk Investments
President and Chief Investment Officer
