Thomas Hoenig (Federal Reserve Bank of Kansas City President)

Inquiring minds may wish to play the Bloomberg Interview With Hoenig

The opening part of this interview is a bit of cheerleading for the Fed, not started by Hoenig, but by Bloomberg’s Michael McKee.

  • Crises vs Problems: “Crises are dealt with in the moment, problems are dealt with in the long run. We have a problem. It’s time to look to the long run.”
  • Overnight Crises Far as the Eye Can See: “If we do not turn to the long run we will be dealing with overnight crises as far as the eye can see. “
  • On Monetary Policy: “We need to provide an environment where people can make decisions, where price signals mean something. We can’t do it all. Monetary policy is a tool that can’t solve every problem in America or the globe today. The Sooner we turn our attention to to the long-term the more adequate will be the solution.”
  • On Stable Prices: “There is nothing inconsistent with stable prices and full employment. Stable prices is a necessary condition for that [full employment] and when you get away from that you introduce instability into the market.”
  • On Full Employment: “Full employment follows a stable monetary policy and a stable fiscal policy. That’s an outcome, not an input”. Michael McKee “Can you target unemployment with monetary policy?” Hoenig “No, I don’t think you can and I don’t think you should.”
  • On Savings Rate: “One of the things in this country we have don’t for two decades now, we’ve consistently consumed more than we produced. That is not sustainable. We had a savings rate that was allowed to go to zero, that is not sustainable.”
  • On Policy Choices: “So what are the policy choices going to be to over time allow our economy to become rebalanced, to produce more, to better balance ourselves with the rest of the world?”


This was a stunning interview, far better than anyone might have ever hoped for from a Fed Governor. Bernanke should listen, but he won’t. Congress should hear, but they won’t. Obama should listen but he won’t either.

via Mish’s Global Economic Trend Analysis: Fed’s Hoenig Says “Fed Can’t Do It All, No Reason for Operation Twist to Work”, Focus Should Shift to Fixing U.S. Fiscal Woes.

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