Autopilot in Reverse: Fed Discusses Regular Use of QE in Non-Emergencies


San Francisco Fed President admits open debate on permanent QE as a regular tool. Autopilot is in reverse gear.

Seven Fed presidents gave speeches this week. San Francisco Fed president Mary Daly provided the closing yap for the week.

Daly said the Fed is debating if balance sheet should be regular tool.

“In the financial crisis, in the aftermath of that when we were trying to help the economy, we engaged in these quantitative easing policies, and an important question is, should those always be in the tool kit — should you always have those at your ready — or should you think about those are only tools you use when you really hit the zero lower bound and you have no other things you can do,” Daly told reporters after a talk at the Bay Area Council Economic Institute.

“You could imagine executing policy with your interest rate as your primary tool and the balance sheet as a secondary tool, but one that you would use more readily,” she added. “That’s not decided yet, but it’s part of what we are discussing now.”

Image from She Dropped Out of High School. Now She’s President of the San Francisco Fed.

In Control Not

This discussion is further admission that

  1. The Fed is not in control
  2. The Fed seeks to manipulate and placate the markets

Any sensible person already understood that.

Autopilot In Reverse

In December, the Fed Chair Jerome Powell said the Fed was on "autopilot" for QE reduction. Following a market taper-tantrum, Powell reversed course.

Today, the truth comes out: If the market throws a tantrum, the Fed will listen.

Related: Damn, That's a Lot of Speeches

Mike "Mish" Shedlock

Comments (37)
No. 1-21

God help us all!

Mish - how much gold is too much, or is it even possible to have too much?


exactly what i was thinking, but what type of debt can the feds monetize? I believe they can't buy equity . what about a debt based etf ? What stops them from going full Japanese ?


The US Government/Corporate/Household "Debt-Berg" WILL be inflated away, of that there is no doubt. Precisely how they (The Fed) will accomplish this feat is what is currently being considered. Prepare yourselves accordingly.


Craziness. It seems the Fed is just out to help the rich with asset inflation.


I am shocked any of this could be in the US Constitution...

Oh wait...