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Dear Mr. Bernanke:


Dear Mr. Bernanke:
I hate to be critical of Fed policy.  Really.  Because  the fiscal policies of both the current and prior administrations, and eleven consecutive years of totally feckless behavior by Congress, has done more than tie one hand behind the Fed’s back; it’s tied both hands, shackled a leg and blindfolded it.

But the time has come for the Fed to face its egregiously destructive policies and change them. 
Deflation was a threat.  In some ways it still is.  Housing went from a bubble to decline to free fall.  Millions of jobs have been lost, fueling deflation.  Your response was to attempt to create inflation and thereby resurrect housing.  Reasonable theory.  The supply chain for housing is gigantic; if it were to be restored millions of jobs would return: not just sheetrock hangers, cabinet installers, plumbing contractors, roofers, electricians, tile layers, carpet layers, carpenters, HVAC installers, landscapers and window installers, but also factory workers in plants that make insulation, wiring, tile, carpet, faucets, sinks, tubs, showers, sheet rock, hardwood flooring, furnaces, roofing shingles, plywood, PVC pipe, fuse panels, windows, air conditioners, water heaters, brick, studs, nails, cooktops and refrigerators.

Unfortunately, it hasn’t worked and still isn’t working.  Gold has soared, silver has soared, all kinds of commodities have soared, but house prices are flattening at the bottom in some towns, still falling in others.  And anyone attempting to live on their savings, or save for a down payment on one of those foreclosed houses, has been brutally punished as the interest rates on anything close to a safe investment plummet to zero. Please pay close attention to that comment: it is harder to save for a down payment when savers get no interest income.
If interest rates had been allowed to rise 23-36 months ago, all of the holders of interest-bearing investments would be far wealthier, and the economy would be enjoying the benefits of the wealth effect, pumping billions into consumer spending and investment, powering the economy forward, instead of the listless recovery we are experiencing.

This is also a brutal attack on the elderly.  Note that yesterday (June 18) the Department of Census released the latest Net Worth and Asset Ownership tables, containing a trove of data.  http://www.census.gov/newsroom/releases/archives/income_wealth/cb12-108.html
What group has the highest percentage of ownership of CD’s?  Those over 75.  What group has the second?  Ages from 70-74.  The Fed isn’t just punishing savers and investors in favor of borrowers, it is punishing the elderly.  The press release notes that older households (households over 65) also suffered the greatest loss in net worth in the period from 2005 through 2010: almost $26,000, or 13.2%.  And that excludes the likely decline in their home value.  We can assume that loss did not occur in savings bonds (which this group also holds) or CD’s.  It was their riskier investments.  The Fed remedy for the economy?  Push savers and investors into riskier assets.  Bill Gross of PIMCO has correctly labeled this financial repression.

I feel like a character in Charles Dickens’ Oliver Twist:  Come on Mr. Bernanke, let us have a little more interest.

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