Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

Mr. Chairman, I think it is clear that inflation has been rolled over by the steamroller of the credit crisis. I am not going to belabor what I have heard from the CEOs I have spoken to. Basically, the best summary is that things have gone from interesting to unbelievable. We have had an implosion of economic activity. Business women and men, not having any pricing power, are doing what you would expect them to do: They are cutting their costs of goods sold, which means they are shedding head count dramatically. They are stretching out their ROI assumptions, and they are cutting back on cap-ex and, basically, assuming pro-cyclical behavior on the downside. I doubt that any of us are going to report anything different, particularly since I think I am in a District that, relatively speaking, is still strong. I would hope that during our discussions today we would each take the time, or at least ask, for some response. I would like some response from you in particular. The situation is dire. There is no question about that. We are in dire straits. There is no inflationary tail, or if there is, it is completely flattened in terms of the foreseeable future. The risks are to the downside on economic growth.

A question I have is, What do we do next? Actually, I should address the issue of what we do first. I don’t think doing dribbles and drabs is an answer. I think we just do nothing—and I could make that case because we’ve done an awful lot—or we do something that is a firm statement. But in response to that statement, the question has to be, What do we do as next steps? I’m particularly curious about whether or not we address during this meeting, and tonight and tomorrow, not only next steps but what the end game is. Where do we want to be? How long are we going to be there, and eventually, how do we exit? But that is, of course, the ultimate question that I think we can delay. So, Mr. Chairman, I’d like to suggest that we not go through our standard ritual of reading about our Districts and so on because I don’t think there is going to be a whole lot of difference. The real question is, What do we do about it, and what’s the cognitive road map from here? Thank you, Mr. Chairman.

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