Comments from an interview with Reuters:
- I don’t personally feel the need for more MBS purchases
- Housing market is ‘on its own now’, becoming speculative
- “I am not alone anymore” at Fed in questioning effectiveness of QE3
- Fed has artificially sustained markets but ‘wealth effect’ has had muted impact on jobs
- Worried that market is ‘hooked’ on QE3
These comments show why Fisher is such an interesting central banker. He has been laughably wrong about inflation and a host of other things over the past 7 years but he always brings something to the table.
Housing is interesting because rents in the US are rising and people need housing. Yet wages are low, employment prospects are poor and access to credit is difficult. As a result, you could argue that MBS purchases are simply freeing up more money for landlords to buy a few more properties.
The same could be said about the ‘wealth effect’ — the stock market returns are being used by the wealthy to buy up housing or to speculate, rather than for building factories and starting businesses.
And the market is definitely ‘hooked’ on QE. Unfortunately, if the Fed were to chase that money out of the stock market, it would simply go to offshore stock markets. That’s the conundrum of open borders.
