Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.
The tag 'Richard Fisher' is associated with 1 posts.

Krugmenistan vs the Permahawks

Lift Off! That was the announcement by the Federal Reserve this week when the world’s biggest and most influential central bank started the long awaited raising of its benchmark short-term rate a quarter point from near-zero levels, marking the first time the Fed has raised rates since 2006. It was big news, except this rate hike was telegraphed for quite a while now and virtually everyone was expecting the Fed to do exactly what it did, so it’s not as big as it could have been. If the Fed had decided not to raise rates, despite all the telegraphing, that probably would have been a bigger story. But would it have been a bad story if the Fed decided to keep rates at their current near-zero levels? There’s a big debate in the economic community over that. And it’s a debate that pits prudent economists with excellent track-records like Paul Krugman, someone who opposed the Fed’s December “lift off” decision, against the broad array of “permahawks”. But it’s not just the question with respect to Fed. The European Central Bank made a policy announcement this month too regarding its stimulus measure and it was indeed rather surprising. And as we’re also going to see in this post, it was surprising in the way that just might have done serious damage to not just the credibility of ECB President Mario Draghi but the ECB itself. Or at least credibility in the ECB’s commitment to its single mandate of keeping inflation hovering around 2 percent.

To placate permahawks (to maintain credibility) or not placate the permahawks (to maintain credibility)? That is the question. Or at least one of the questions central banks face. Unfortunately.