Fisher Warns Fed of Trap: `Hotel California’

Photograph by Patrick Fallon/Bloomberg

Richard Fisher, president and chief executive officer of the Federal Reserve Bank of Dallas.

Federal Reserve Bank of Dallas President Richard Fisher, hardly one to resist using a good metaphor to explain the intricacies of central banking, has upgraded his equine assessment of the economy.

He’s also added some classic rock and roll the mix.

“I really do believe my own joke that we’re the best looking horse at the glue factory,” Fisher said today in a CNBC interview, citing the productivity gains of U.S. firms compared with worldwide rivals. “We’re the thoroughbred of the global economy right now.”

As the first of 19 Fed officials to speak publicly after this week’s meeting, Fisher stepped up his game in explaining why he’s wary of the central bank’s Dec. 12 decision to boost their bond buying by adding $45 billion of monthly Treasury purchases to an existing program to buy $40 billion in mortgage debt a month. That puts the Fed’s $2.92 trillion balance sheet on pace to hit almost $4 trillion by the end of next year.

“Since we’re going to have an engorged balance sheet, we may never be able to leave this position,” said Fisher, 63.

“We were at risk of what I call a ‘Hotel California’ monetary policy, going back to the Eagles song which is, you can check out any time you want but you can never leave.”

Fisher made no attempt to tie the band’s 1979 hit, “The Long Run,” to John Maynard Keynes’s famed observation that under such an elongated time-frame “we are all dead.”

Fisher, a former Dallas money manager and U.S. Senate candidate, also noted that Eagles front-man Don Henley comes from the Lone Star State, which also happens to be putting decent growth stats on the board these days.

The reserve bank chief, a California native turned proud Texan, participates in Federal Reserve Board meetings in Washington with Chairman Ben  Bernanke and other policy makers. The district banks rotate in and out of voting positions each year. Dallas gets to vote again in 2014.

Before ending the interview, Fisher said he had to “brag on Texas,” where he expects economic growth of 3.5 percent this year. That’s faster than the 2.2 percent U.S. gross domestic product growth that economists forecast for this year, according to the median of estimates in a Bloomberg survey.

The second-largest state’s 26 million residents can boast a $1.31 trillion economy that’s bigger than Mexico’s — a nation which is about five times more populous. As Fisher might say, Texas has a full tank and its foot on the gas.



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