Fisher Slips A Freudian

FRANKFURT (Reuters) - The U.S. debt situation is at a "tipping point," Dallas Federal Reserve Bank President Richard Fisher said on Tuesday, and urged the U.S. central bank to refrain from any further stimulus measures.

"If we continue down on the path on which the fiscal authorities put us, we will become insolvent. The question is when," Fisher said in a speech at the University of Frankfurt.

Read the bolded sentence twice. It may be the best Freudian slip by a Fed official ever.

While it's quite possible that Fisher believes in his heart that he must sound the alarm on our nation's debt problem, it's more likely that he's just admitted that the Fed itself is in danger of insolvency.

Remember that the Fed has private owners and shareholders. It's in the business of making billions of dollars each year by renting money to the US government.

The Fed knows that its QE has not worked, is not working, and will not work. Its owners are realizing defeat. The buyer of last resort has limits too. You may recall I said so in a post back in October:

Instead, look for an increasingly more conservative Fed. Its owners are used to making money, not losing it. A balance sheet polluted with worthless garbage will not serve their needs, nor would it ensure their survival.

I think it's fair to say that Fisher just confirmed it.

One more comment.

"If we continue down on the path on which the fiscal authorities put us . . ."

This sentence is false.

He's trying to make a distinction between fiscal and monetary policy, between the government and the Fed, and have us believe this was all the government's fault.

Both parties have failed. Both are guilty. If the Fed is going to start bitching and complaining, maybe we could help ease their pain.

By dissolving them.