Kansas City, MO – Thomas Hoenig has always been candid. A couple of years ago he wrote a paper called, "Too Big Has Failed," a critique of propping up big banks. He's also bucked the Fed's easy money, low interest rate policy for years. Speaking to the Greater Kansas City Chamber of Commerce, he said that keeping interest rates artificially low has actually enabled the real problem.
"In a world of instant gratification, we have had two decades, in this country where we consume more than we produce, by a considerable margin." said Hoenig.
No country can do that forever, according to Hoenig. Even though the Fed keeps trying to goose the economy with cheap money, the economy can no longer jump.
"That's why I have systematically opposed the use of money as a mechanism to solve all of our problems. You cannot tell me a business, a commodity, a service, that trades well at the price of zero and allocates resources well at the price of zero. Why would it do so with interest rates? It won't." he said.
And Hoenig said that those low interest rates have given lawmakers cover to paper over serious long-term problems with short-term fixes.
"People say, and I understand it, 'We need to add jobs, we need to add jobs.' But the problem is, you don't just add jobs, you produce things, you make things, and from that jobs come."
Hoenig said that leaders need an attitude adjustment, to think long-term, to get serious about, among other things, the deficit. He thinks they should pass a broad package of spending cuts and tax hikes, like the ones the Simpson/Bowles commission outlined last year.
Hoenig's ideas haven't always gone over that well in Washington, but in Kansas City the business class sent him off with a long standing ovation. Frank Lenk, an economist at the Mid America Regional Council, said that Hoenig has infused Midwestern sensibilities into the monetary policy debate.
"He put a Kansas City voice in the thick of national policy making. Took that conservative, Midwestern ethic to Washington, or to the Fed, and provided a perspective that others didn't."
Lenk said that Hoenig's perspective has started to grab a little more traction lately, with two other Open Market Committee members joining the dissent.
That Kansas City voice will likely ring after Hoenig's last day on the job. Esther George, who comes from a little town near St. Joe and holds an MBA from UMKC, takes over as president of the fed bank here this Saturday.