Mr. Fisher, it's good to have you on.
Thanks for being with us.
Yeah, thank you, Scott. Good to see you.
I'm sure you've heard some of the calls made on
this network today that the Fed needs to do some
emergency action.
You laugh, but what's your reaction?
Well, it's a little bit airy.
That started in Japan. It was off over 12%
in Taipei. Taiwan was off over 8%.
And when I say Erie,
it reminds me of 1987.
October 18th is when things started selling off in Hong
Kong
and of course we had a dramatic move,
20% down on October 19th,
87 here. Now what did the Fed do?
Alan Greenspan on October 20th.
So the day after the huge downward Swope
came in and said simply the Fed is ready to
provide liquidity
to support the economy and the financial system
did nothing else.
And I think this business of asking the Fed to
react
with a cut, I agree with Ron and Santa who
just said
maybe because we've been friends for I guess 30 years
now
that it would be panicky and it might send the
wrong signal.
the Fed will always act
if some something occurs that threatens the credit system
or the economy. And it's not clear that what's happened
the last few days including today with a dowel off
over 1000
that's going to impact the economy significantly or threaten the
credit system.
If it does then they would move.
And the other thing I would say,
Scott is remember they have the
Jackson, they have the Jackson Hole meeting coming up in
two weeks.
That's right. They'll that'll be a very interesting session to
watch and see what kind of signals that are sent.
I don't see any need to move intra meeting
unless there is a threat to the credit system And
we we can't say we see that yet after just
a couple of days of harsh market reaction.
Ron made the point though that the the Fed shouldn't
do anything before September,
but they should say something now
along the lines of the lines of,
of what you suggested Greenspan did back then that
that Fed Chair Powell should come out and say we
will provide liquidity.
He he said exactly what you say.
Should he do that? Should the chair come out today
and say in in light of these global developments,
the Fed will be there to provide whatever liquidity is
necessary if it is needed.
Not sure he should say that today,
but he should have it in his back pocket.
And again, we have Jackson Hole in literally two weeks
from tomorrow.
So
I think you there's no such thing at the Fed
as instant analysis.
You know, one thing I disagree with Ron on,
which is rare, is of course they were aware of
the Japanese
carry trade. Everybody's aware of it and the Fed brains
are been watching that very carefully.
But they have to be careful not to just have
instant analysis and react like so many people appear to
do today.
Their job is to think things through,
be calm, reassuring and make sure that
that it's not threatening the credit system.
We did see a big pop up in spreads today,
triple C's and junk,
and we saw it starting over the weekend.
So maybe that's sending a signal.
We'll have to see Ron.
We'll just have to see Scott and see whether or
not that requires some statement from the Fed.
But I'd have it in my back pocket just in
case.
That doesn't mean you cut
necessarily. It does mean you could provide some reassurance by
a simple statement like Greenspan made at 87.
But this isn't 87. This isn't 20%
in one day. We'll just have to wait and see
what obtains.
Do do you think they're already too late though to
to cut the point that Rick Reader of BlackRock makes
today is they're already far too restrictive given where inflation
is relative to target and then especially relative to where
the Fed funds is,
is already that they're they're way too restrictive now and
they need to do something sooner rather than later,
even if the economy is still in a relatively stable
place.
I'm quoting from his post on social media short time
ago.
Well, Rick is one of the giants in the business
of enormous respect for him.
But again here I beg to differ.
I don't think they need to to cut right away.
I think there is room for them to move in
September.
I'm not of the view that they need,
at least as of now,
to move 50 basis points or more.
Some have even said 75 basis points.
I think they've done a good job.
Inflation is coming down. We're disciplating further,
the economy is still growing,
although weakening, and thus far,
despite all the criticism that Powell and the committee have
faced,
they've done a pretty good job.
We're still not landing, and it's not clear we're going
to have a harsh landing yet.
We'll just have to see.
But why would you want to move before September?
If you have a chance to make a statement at
Jackson Hole,
we have almost all the other good central bankers around
you
and see what you can come up with.
That may be reassuring.