The NYT profiles Thomas Hoenig, the KC Fed Chief who’s made a name for himself by being the only dissenter on the FOMC, as it’s loosened and loosened monetary policy on the way towards quantitative easing.
Hoenig represents a distinct Midwestern populist sort of economic conservatism.
He thinks Bernanke’s made a “deal with the devil” in plying the market with endless liquidity, and at the same time he’s called for the breakup of gigantic, too-big-to-fail Wall Street banks, having long ago warned about the prospect of bailouts of large institutions (before the repeal of Glass-Steagall).
As for the risks of current policy:
“It is my concern that, by understandably wanting to see things move more quickly, we create the conditions for repeating the mistakes of the past,” he said.
Mr. Hoenig’s mantra is that monetary policy works with “long and variable lags,” meaning that the consequences of today’s policies may not be felt until much later. By keeping short-term interest rates near zero, as the Fed has done since December 2008 — and which he supports but not indefinitely — the central bank is increasing the risk of inflation and instability down the road, he says.
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