INVESTING: Dear Fed boss Bernanke: Read this and take heed

Keywords Economy / Environment

I know you have a good heart. Evidence is beginning to mount, however, that we are sliding down a path we cannot easily climb back up. In the vernacular of my old hood, Ben you are killing us!

The world is faced with two problems,

massively slowing growth and accelerating inflation. You picked the slowing growth side to attack head on.

You and your back-room cronies slashed interest rates from 5.25 percent in August to 3 percent now, with more coming. This ludicrous campaign has crushed our dollar, cutting the buying power of your fellow countrymen more than 10 percent.

I guess it’s not a big deal if we pay a little more at Wal-Mart for stuff from China we really don’t need. But the falling dollar has had the unintended effect of shooting the price of oil through the roof.

The ethanol boondoggle was bad enough without the added shot of hyper-oil. Now, Ben, see if you can follow me on this: Oil goes up, which means we pay more for almost everything. With high gas prices, the politicians are even more bent on pushing the ethanol mistake, so more corn gets planted instead of wheat. With lower supplies of wheat, its price breaks out of a 35-year trading range and goes up more than 50 percent in the last year. Ben, can you tell me any common uses for wheat?

Your desire to fight slowing growth is causing inflation to rise faster, which is slowing growth. You are a smart guy, Ben. Somewhere in the vast workplace of the Fed, you must have a formula that can show you how much worse this can get.

I know you told us you could raise rates later, which will cure the inflation problem once you fixed the growth problem. You seem convinced you can put that sucker back in the bottle. For the sake of millions of Americans, I hope you are right. Before you become right, though, I have a feeling we are going to experience more pain in both the equity markets and the economy.

Oh, and the move you pulled in late January with the emergency three-quarters-of-apoint cut was completely bush league.

You reacted to global falling equity markets without a clue as to what was going on. France-based Societe Generale’s recent unwinding of trades made by a rogue employee of the bank had caused stocks to fall further than they normally would. Which means prices would have come back in a few days if you had just kept hands off.

At most, all you did was create a sixweek environment where big banks and institutions could unload more of their unwanted stocks. The average guy’s 401(k) plan? I guess you don’t care about that.

Ben, your predecessor bears more of the blame than you, at least to this point.

But don’t keep adding gasoline to what could turn into a raging fire. Leave interest rates alone at the next meeting, then do the right thing and resign. Get out now, or your opponents will run you out next year.

Your friend,


Hauke is the CEO of Samex Capital Advisors, a locally based money manager. Views expressed here are the writer’s. Hauke can be reached at 829-5029 or at

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