On July 16, 2014, then Dallas Fed President Richard Fisher said at a speech that, “When money is dirt cheap and ubiquitous, it is in the nature of financial operators to reach for yield.” He also cautioned that the macroprudential supervision can be circumvented, and that the reliance on it to prevent financial instability would produce “an artificial sense of confidence.” Fisher’s warnings were not taken seriously, but he was proven prescient by the sudden demise of Silicon Valley Bank. This month’s report discusses the ramifications of the banking crisis and their impact on the economy and the Fed’s monetary policy.
