Fed Vice Chair Fischer Admits Fed is Waiting for Godot

The Fed’s fourth mandate.

In his keynote speech on the usual suspects of central-bank topics at the Institute of International Finance’s big shindig in Washington DC today, Fed Vice Chair Stanley Fischer nevertheless managed to develop a new theory for a fourth Fed mandate.

This new mandate would come on top of the third mandate: inflating asset bubbles at all costs (unlimited asset price inflation). The other two mandates are “full employment” (whatever that means) and “price stability,” which is ironically defined as consumer price inflation, the way the Fed counts it, of at the moment 2%, and a lot more in most people’s real-life experience.

Fischer has been grumbling about the slow growth of the US economy for a while – “Everybody is trying to find out what is going on,” he said today, and then went on to explain what’s going on. Turns out, what’s restraining economic growth and investment is a lack of “confidence” and “animal spirits.”

“Confidence has to be turned on for people to want to invest and we’re waiting to see that happen,” he said, according to MarketWatch. “It will happen at some point. But precisely when” is unknown he said.

“Animal spirits aren’t there – people aren’t excited about growth prospects.”

So no interest rate increases until these “animal spirits” and “confidence” show up?

But, but, but… the Fed’s monetary policies for the past eight years have created the biggest credit bubble in US history, including the biggest junk bond bubble ever, a stock market bubble, housing bubbles in numerous cities around the country that exceed by far the peaks of the prior housing bubbles that imploded so spectacularly, the most gigantic commercial real estate bubble, now according to the Green Street Commercial Property Price Index, 26.5% above its totally crazy bubble peak of August 2007….

Some of Fischer’s own colleagues have been loudly fretting about asset bubbles – including Boston Fed governor Eric Rosengren, a voting dove of the Federal Open Markets Committee, where monetary policy is decided, who’d zeroed in on the commercial real estate price bubble:


As the chart shows, bubbles get really crazy and then they implode. Bubbles are not great, long term, for the economy overall. They’re only great for their beneficiaries, if they can get out in time. Innocent bystanders suffer when bubbles inflate (for example, life gets more expensive but pay stagnates), and they get unceremoniously plowed under when bubbles blow up while the big beneficiaries that couldn’t get out in time, get bailed out.

The charts for these asset bubbles look just out of this world. Or they would have looked out of this world before the era of QE, ZIRP, and NIRP. Now they basically look normal. Because they just about all look like that.

Despite Fischer’s proclamation that “animal spirits” and “confidence” were lacking, it was precisely “animal spirits” and “confidence” that drove these investors, speculators, corporations, and Wall Street to take all these huge risks all the time, and plow other people’s money into these assets.

Animal spirits, pure and simple: Blind risk-taking associated with herd mentality. Everyone is chasing after the same thing, motivated by Fed policies and funded by nearly free money, building up maximum leverage, and driving prices higher and higher in the process. Exactly what the Fed had wanted from get-go. Bernanke called this policy goal the “wealth effect” in a Washington Post editorial back in 2010.

For investors and speculators that have been piling into these markets, it takes enormous confidence to keep doing it, even after prices have already soared far beyond any economic rationale. It’s that enormous confidence in the Fed that drives these markets. At the slightest weakening of confidence in the Fed, markets swoon, and the Fed steps back in and nurtures the confidence back up.

So Fischer is now saying that these “animal spirits” and the “confidence” that blew all these bubbles weren’t quite enough, and the Fed might wait with interest rate hikes until it sees animal spirits and confidence.

In other words, the Fed is always forever waiting for something – whatever it might call it at the time: more jobs, even higher asset prices, whatever pretext, including its fourth mandate, “animal spirits” and “confidence” on top of the craziness already out there.

Oh, did Fischer mean confidence in the real economy, rather than in the Fed’s ability to inflate asset bubbles? Alas, given the Fed policies focused exclusively and explicitly on inflating asset bubbles while trampling on everything else, confidence in the real economy might never return.

Thus the Fed (in Fischer’s view) might be Waiting for Godot, as writer Samuel Beckett foresaw with impeccable accuracy in his play written in French 67 years ago, about two characters who wait in vain for the arrival of Godot. The play was part of a movement, called the “Theater of the Absurd,” a most befitting category for the show the Fed has been staging for years.

Meanwhile, after six years of Fed and Wall Street hype, the real economy has some real problems. Read… The Great Debt Unwind: Business Bankruptcies Soar 38%

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  49 comments for “Fed Vice Chair Fischer Admits Fed is Waiting for Godot

  1. LG says:

    This country has been in a depression since 2000!
    Think about that for a while.

  2. Bryce Nelson says:

    If animal spirits take over like they did in the late 1990’s, that will be a bubble to end all bubbles. The bubble in 2000 was only in stocks. The bubble that popped from 2005 to 2008 was in housing. If animal spirits come alive, it will lead to a bubble in bonds, stocks, housing, commercial RE, land values, etc. There won’t be many places to hide from since it would truly be an “everything bubble.” One can argue now that asset prices as a whole are already in a bubble. Bonds along with stocks that benefited from yield-chasing like REIT’s, utilities, and consumer staples fit the description of a bubble.

    It makes sense that the longer the fed keeps interest rates below the inflation rate, the bigger the bubbles will be. We have had 30 years of the fed keeping rates too low with no change in sight. Their policies are getting more extreme as time goes on leading to worsening outcomes. Is their goal to pull forward returns across financial assets to 0%? That won’t do any good over the long-term either while destroying banks, pensions, insurance companies, savers, etc. I don’t see how destroying banks leads to a better economic outcome.

    I am also in the camp that animal spirits will not eventually come alive in the financial markets as a whole. What the heck is their worth being excited about? Fed manipulation of our markets? With that being said, animal spirits are already occurring/occurred across the stock market over the last few years. We have/had bubbles in Web 2.0, 3-D printing, crappy IPO’s, biotechs, government bonds, junk bonds, REIT’s, consumer staples, utilities, and low volatility stocks. I am sure there were more bubbles that I forgot or am not aware of too.

    The majority of people feel the economy is rigged. The Millennials don’t trust the stock market because they have only seen booms and busts. So who will buy all these stocks and bonds that pensions and Baby Boomers will eventually have to sell? This has been the slowest recovery on record and we don’t have the demographics for a strong economy or stock market. Good paying stable jobs are hard to come by for the masses. I don’t see how this economic environment will lead to “animal spirits” running wild across every asset class in the financial markets.

  3. Ptb says:

    “Animal spirits” , ” full employment ” and “confidence” ….hmmm, I’m thinking you need all three to get the party really rolling. Full employment is a sham, and if it did exist, why have real wages not increased in 15 or 20 years?
    The body of lies is stacking up and starting to have a stench that don’t be ignored. I guess the Fed has lied about the smell for so long that they’re now pretty much nose blind.

  4. Maximus Minimus says:

    Lack of confidence sounds right, but not what he had in mind: it is the lack of confidence in the FED.

  5. Chicken says:

    Zeno’s Bisection Paradox you describe, his logic is of Greek origin?

  6. Unitron says:

    People who don’t know how the financial system works, shouldn’t be allowed to get away with claiming their policies will eventually bring about recovery. Anybody who talks about the wealth effect like it’s a real thing should be required to prove how it’s supposed to help anyone who has to work a real job, not related to shuffling money. How bad do things have to get before the journalistic bozos stop talking about economic easing and stimulus when referring to central bank policies? Central banks are powerless to make things better, except by getting out of the way, but they can keep the bubble going just long enough to make the burst all the more devastating.

    • John Doyle says:

      It has a name. It’s called “econobabble”. This is the title of a book by Richard Denniss, describing how we the public are led astray by econobabble , dressing up false theories in language designed to divert people from learning the truth.
      George Monbiot talks similarly on it too;


    • Meme Imfurst says:

      Not one of them ‘earned’ their respective ‘jobs’. They are good ol’ fashion featherbedding, a branch of crony capitalism, pay-back Quid-pro-Quo appointments.

      I guarantee, not even H&R block would have one of them doing the tax return of a waiter from Hooters.

      And……’and plow other people’s money into these assets.’ Indeed, I watch my friends admiring the fine new cloths on the Wall Street emperors as I hold my breath and my (these days)mouth.

  7. Justme says:

    I’m not the least bit interested in confidence. What I want is COMPETENCE.

  8. The largest bubble I’ve seen this decade is the one the Fed’s live in. Out of pocket health insurance single/1168 a month. I feel like a real tiger.

  9. Patrick says:

    He wants animal spirits then just raise rates 1/4 pt. There will be another big sell-off in the DOW down to 15,500 and all the animal spirits will BTFD. Then rinse-wash-repeat – at least until traders become so trigger happy to sell that they’re afraid of their on shadow. Gold shouldn’t do to shabby either as a safe haven.

  10. C says:

    The well is poisoned from the 2008 fiasco. It will take a generation of growth to restore confidence. It aint gonna happen.

  11. TArthur says:

    “have a stench that don’t be ignored. I guess the Fed has lied about the smell for so long that they’re now pretty much nose blind.”

    That stench is not animal spirits but animal feces.

  12. AGXIIK says:

    Animal spirits? That’s kind of hard when the Fed is calling Soo-eee, pig pig pig and slops the hogs at the FIAT trough as even PIG is gobbling as fast as he can, cheek to jowl with all the other pigs. Animal spirits are possible when each person gets a shot at the brass ring. With 95 million people unemployed or with little more that cash only gig jobs to pay the bills. Animal spirits now generally involve the saying
    “Root hog, or die”

    • Edward E says:

      I resemble that remark.
      It’s “Wooooooooooooooo Pig Sooie”

    • Meme Imfurst says:

      You just explained why Trump is has a 95% chance of becoming …..

      • Edward E says:

        Oh don’t fret it… He has maybe a twenty percent chance of winning. She is going to be installed as our Commander in Theif.
        And cocaine use makes people grandiose liars, villains, theives and sniffling. As I personally witnessed at a big shindig in Arkiefornia.

    • JMiller says:

      AGXIIK ,

      Most of those 95 million that you say are unemployed are mostly full-time students, stay-at-home moms, disabled and retired persons. So most of the 95 million are not really unemployed since they are not available or able for full-time employment.

  13. Jas says:

    Who wants to be the one that wrecks the economy? These FED Presidents have no idea how their policies affect folks on main street. I wish that someone would remind the FED Presidents that Wall Street stocks and bonds are NOT the economy. There (seemingly endless) asset bubbles are destroying our REAL economy and quite a few lives along with it!
    I’ve lived in San Francisco for ~ 16 years and have witnessed the present Real Estate asset bubble from the beginning. I’m literally sitting here waiting to hear from my landlord, how much with the rent increase be this year? Am I going to be homeless? Am I going to have to leave my friends and family and the job I’ve had for the last 10 years?
    The FED Board likely never discusses us in those high profile meeting they have, do they?
    Seems like Wall Street has taken a pre-christian, primitive God like status, with the comments on market fear, confidence, satisfaction..
    We must keep sacrificing to keep it satisfied.

  14. David Calder says:

    People who work for wages have no money.. Wages are depressed partly because the bosses club has been able to wreck the unions but just as worthy a reason is we are seeing the automation of just about everything where the technology exists to do so and it is only getting started.. I am still awed that Foxconn, maker of Apple’s iPhone, laid off 60,000 in China and fully automated the plant because 65 cents per hour was too much of a burden.. Where are the customers going to come from if $26 per week is too high of a salary? The only animal spirts I see coming will be when the peasants discover they still own pitchforks and the dunes of Long Island make poor bunkers..

    • Edward E says:

      The only thing that the bosses club understand is something like the Bonus Expeditionary Force pulled off. They honesty thought that the active military were about to join with the veterans. That got FDR elected and the people actually won something for a change. Right now all the people seriously need to take to the streets all over the world, surrounding them all, that would stop the incompetence and restore confidence for a while.

      • Meme Imfurst says:

        Look up Kent State massacre.

        Then fast forward to now. And, ask the rhetorical question again, what military and what ‘people’ and what street.

        • Edward E says:

          Hey there you are, Meme, is everything going OK? Been a bit worried about you, hope you all made it through the storm. One of your comments had kind of finished a little hurriedly, brilliance as always but then you were absent for a while. You were probably just in a hurry, my mother was a worry wart and that trickled down to me.

          What concerns me is that the Pentagon seems to be prosecuting the war in Syria, among other places and then chatting up the Commander in Chief whenever they damn well feel like it. What I’d like to see is more veteran opposition to these nightmares, they’re giving astute folks migraines.

          People standing up in opposition is never easy. It was extremely difficult for the Bonus Army, their camps were set ablaze and two were killed. You are right that the Kent State shootings were a travesty. This did lead to better methods of crowd control and rubber bullets. Yeah, the way everyone in the police state is militarized now, I should backpedal what was said. Maybe we should all just go on a national strike for a few days. Or is that terrorism now?


    • Petunia says:

      Charlie Rose is a liberal’s liberal. He must be happy that globalism finally squashed the little people into poverty. I doubt he will be gloating long.

      • John M says:


        When the party really gets going the denouement will be complete. I sense that as the inflation that will arrive could finish the Fed. We really don’t need a Federal Reserve. The Congress and Federal Reserve elites have bastardized our currency, If Trump doesn’t get elected then Clinton will be one and done. The whole system is about to get very interesting (understatement)

    • Phillip L says:

      Watched the interview. Goldsmith hit it right on the nose. It started 25 plus years ago, but things take time. The working class and what is left of the middle class have woken up to the way they have been screwed over and they are angry, hence the rise of Sanders and Trump. It took a few generations to hollow out what Goldsmith called the implicit contract between labour and capital within a national border to share the proceeds, it will take another to make an attempt to right it, but I fear that it is a lot harder to put Humpty Dumpty back together again than to build it the first time.

  15. NotSoSure says:

    Godot is here and his name is Fischer. It must truly be a divine coincidence that his last name is one “c” away from Fisher as in Irving “high plateau” Fisher and we all know what happened back then.

  16. shaba says:

    Don’t think the fed, or the ECB, will get anything resembling ‘animal spirits’. Many of the people who were hurt so much in 08 are the people who drive bubbles to their peak, ie the middle class.

    I look at my grandparents for similarities. They were children of the Depression and they kept that resulting mentality their whole lives: eat everything on your plate, live within your means, save for a rainy day.

    Could be wrong, but from here it seems many of the US, EU middle classes haven’t recovered and / or are rightfully gun shy about ‘investing’ in anything mainstream enough to invoke animal spirits.

    • Petunia says:

      My parents lived thru the depression as well and always lived modestly and they died broke. I got a good education, a good job, lost everything, and will die broke as well. Are you seeing a pattern here, my millennial son does.

  17. night-train says:

    My spirit animal is a turtle. And this turtle has pulled into his shell and is in no hurry to come out into this economic environment. I hope Wolf has a good pair of hip boots for wading through all the crap these Fed types throw out.

  18. Chris says:

    All the Fed is doing and has been doing since the days of the “legendary” Alan Greenspan is creating more currency to maintain liquidity. Liquidity, in theory, results in consumption. However, that consumption only occurs with debt creation. The bill has come due and repayment of the debt can no longer be achieved by debt re-financing. Individuals who can still borrow are reluctant to do so and likely always have been. The average borrower who is inclined to go further into debt can no longer do so. We are about to witness the greatest Ponzi Scheme in history unravel.

  19. Joel says:

    Maybe I can add to this cheery thread. Had my annual car inspection today. Small shop owner. I’ve thought of him as conservative for years, part time christian preacher who accepts evolution and science generally, would have voted for Bernie, despises Hillary for what she did to Bernie and—guns. Has lots of guns, lots of ammo, lots of friends who have lots of guns, lots of ammo, been accumulating for years. Seems like Bernie progressives and angry christian conservatives are growing ever more restless. Add in the trumperoonies and it looks like the middle(read wall street) dems and repubs are getting squeezed from several directions. Mathew is going to hurt the climate deniers also.

    • Petunia says:

      The establishment made a big mistake when they quashed the Occupy movement. Taking those people off the streets only sent them underground where the resentment grew unchecked. Trump and Sanders were only the tip of that iceberg. The biggest part is yet to be felt.

      • Meme Imfurst says:

        You can bet, big money, that Soros has his ducks lined up to cash in on the chaos HE has planned for the USA…icebergs and all. Don’t forget he is dead center of this USA/Russia unrest, Hilleriy cheerleader exalted, and ready for the first ‘accident’ to execute.

        Evil in ‘human form’ is George Soros and everyone needs to wake up.

        “When the angry bear comes from the north to the land of the prophets, the end time will be upon us.”

        Funny, that is just what is happening, and everyone seems to feel it.

  20. Chekerz says:

    I don’t hear a thing you guys are saying. I’m in my safe space and protected from all of your ugly triggers, and buying the dips.

    • frederick says:

      Keep buying those dips Chekz and you will end up in a depression and a deep one that you may not be able to crawl out of

  21. walter map says:

    Fed policy, and federal policy, has been to enrich the wealthy by liquidating the real economy, while carefully avoiding doing anything that would help the real economy. This keeps the general population disempowered, keeps wages down, and keeps profits up.

    Which is what they wanted, and which is what they got. Of course that’s what they wanted. If they wanted a different result they would have done something else. But they didn’t. These guys aren’t stupid. They only pretend to be stupid so they can keep the record-breaking upward wealth transfer going.

    These guys don’t work for the general population. There’s no profit in that. They work for TPTB:

    – They want you to think that the destruction of the U.S. middle class is merely an unfortunate side effect, when in fact the goal there is strip the middle class of its accumulated wealth and sluice it up to the TPTB.

    – They pretend to be concerned about inflation, but that’s just their smokescreen for their concern that wages might rise and reduce profits.

    – They pretend Obamacare is a health care program, when it should be obvious to anybody that it’s just another extraction mechanism.

    – They want to grab the Social Security surplus, and they’ll get it. They’ll get rid of SS because it makes people less insecure, less desperate, and therefore less exploitable.

    – They pretend to be concerned about budget deficits and the national debt, but really, where did all those trillions go? They got it.

    – They never complain about the military budget, because they profit wildly from it, and gin up wars to keep the plunder going.

    – They’re selling off the U.S. economy because it maximizes short-term profits, degrading the economy and therefore providing the rationale for ‘stimulus’, aka more handouts for the rich.

    They will continue to rob the country until there’s nothing left to steal. And they’re doing it right in front of your eyes.

    • Petunia says:

      Amen, brother!

    • John M says:


      You’ve succinctly described what Philip Green has done with BHS in the UK. 20,000 pension plans have been obliterated by his “Legalized” selling of BHS group of stores. Green could see the writing on the wall that the BHS corporation was failing and sucked his money out. He got Dominic Chappell to be the fall guy and keep the company running for “due diligence” of 1 year and a day so that there was no legal grounds from parliament with any legal blow back. Green got his £400 million out and the pension plan now has a £571million shortfall.

      Apple currently has $220 billion in cash but as a multinational no longer pays any taxes pretty much anywhere, yet Apple wants the US courts to protect their patents of design of their precious iPhones. The trickle down economics aren’t working. We’ve populism on fire world wide. In Germany you have AfD (alternative for Deutscheland) . In France you have Marine Le Pen with Front Nationale. In the UK you have had Brexit and in Italy you’ve got Movement Five Star, “Founded” by Beppe Grillo a well know comedian. We are going to have very interesting times.. As George Carlin RIP explains, there’s a big club out there and you aren’t in it. https://www.youtube.com/watch?v=kXhZyAOuyhE

    • SaveUs says:

      Walter you nailed it. As Chris stated we are living in a ponzi scheme that is slowly unraveling. I think it is unraveling not only for us but for the other G7 nations as well.

      I believe that the TPTB (BIS, IMF, World Bank, Federal Reserve and the Multi national corporations) have been for a long time setting up a new ponzi scheme for the BRICS nations.

  22. Sound of the Suburbs says:

    They just can’t come to the inevitable conclusion …….

    The economy is demand driven and they have been around impoverishing the global consumer with economic liberalism.

    Oh dear.

  23. One way to look at this from an a somewhat different and informative perspective is to reflect on this :

    When oil was first used most effectively a century ago, by the Anglo and northern European sphere of great machine creators ( replacing men with machines, eh ? ) the EROEI for oil was high. Perhaps as high as 100:1 in some cases of extremely productive wells.

    MY POINT IS THIS : Nearly free energy ( high EROEI ) combined with the labor multiplier of complex, incredible machines . . . . this was the source of the massive increase in humanity’s standard of living since the industrial revolution. CALLED GROWTH ! !

    THOSE DAYS ARE NOW GONE: the high EROEI-s are gone, and the resulting incredible S.O.L. is gone with the high EROEI.

    Recognizing this saves time and a lot of hand-wringing over what may have gone wrong. Nothing has gone wrong, base conditions have changed.

    I learned this all from Gail Tverberg and Ugo Bardi, I am not that bright all by myself


    • Meme Imfurst says:

      Wall Street profits up some 800% over the past 30 years while over that same period median weekly earnings for the American worker have risen about 9% ( which has not keep up with inflation). Imagine all CEO’s replace their domestic workers with cheap foreign workers in hopes of increasing profit, because that is where we are going. The computer and phancy pone has increased productivity and profitability as much as cheap energy’s influence, but the standard of living has dropped.

      That is a sample of the “base” that has gone wrong.

      Your reasoning seems flawed. Hand wringing indeed.

    • Chicken says:

      Oil prices have been halved recently, where’s the beef?

  24. Gunther says:

    The talking points feel like socialism in its late days. Every plant produced more than was planned but the shelves in the stores were almost bare, in other words, there was total disconnect from reality.
    today tis is done by adjustments; government statistics are great and shadowstats corrects them to the real depression level values we are at.

  25. Peter Forsyth says:

    Financial gangsters have overridden democracy by installing themselves in governments across the western world. Their frontmen are the presidents and prime ministers who are excepting campaign (very sick ) xes. contributions! Technocratic fascists set the agenda and then load us all up with debt when things wobble. We vote but get kicked in the teeth with lies and taxes. There is no going back to where we were prior to 2008 but they will only con us with the mainstream media until……

  26. bead says:

    Bubble implosion is too frightening. The Fed must blow the bubble bigger than ever and sucker the poor chumps in to get fleeced again. Next recession will be too interesting.

  27. Tom Kauser says:

    It has been eight years since the bubble bust and counting.
    The derivatives market was used eight years ago to develop cans of hope ? Opaque securities designed to hide fraud and bridge gaps in short term funding (until central banks ruin everything raising rates and winners and losers get assigned?)
    Which of course never happened for the last 96+ months and all signs point to never happening or worst raising too little when too late?
    The economy is doomed as moral hazard replaces interest rates as assignee of winners and losers?

  28. Antonio says:

    If you take a close look at the chart, Fibonacci ratios are being played to perfection, that’s why they’re based on natural laws. The 126.8% extension (actual current point) should make anyone investing in that market to get the heck out of it, as it’s going way down from here. Nature laws are usually right…

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