An Open Letter to the Fed: What’s Your Number Ben Bernanke?


Dear Chairman Bernanke,

I’ve been in business for more than 25 years and if there’s one thing I have learned it’s that every real business leader worth a damn has a number.

That’s the figure where they throw in the towel and admit defeat. It’s the precise instant they acknowledge that they will no longer throw more money at a bad idea. It’s the point in time where they seek fresh counsel and new ideas because the pain of staying the course becomes too great.

Chairman Bernanke, what exactly is your number?

You’ve just announced Operation Twist (again). You’re preparing to spend another $267 billion buying long-term securities as part of a plan to keep rates low through 2014.

You position this as a means of stimulating hiring and supporting a flagging economy that needs more support. You counsel that it will spur borrowing and spending.

We all submit that your plan is not working.

Four years and trillions of dollars into this mess, your Fed has taken a buzzsaw to growth estimates, most recently cutting them to 1.9% from 2.4% for this year. If the government multiplier everybody always cites actually worked, our economy should be screaming along at 8% a year or more.

Yet over 6 million people have left the workforce, which makes the most recent 8.2% unemployment mark extremely suspect. Hiring is slowing again. Factory output is dropping and consumer confidence is faltering.

You’ve said repeatedly that you can create more “accommodative” financial conditions. When announcing the most recent continuation of Operation Twist, you noted using “non-standard” tools.

Like what…exactly and specifically? Our financial sector is still appallingly overleveraged and undercapitalized. Jamie Dimon’s traders used “non-standard” tools to supposedly hedge JPMorgan’s risks and suffered at least a $2.1 billion loss. The word “non-standard” scares the hell out of me, Mr. Chairman.

I can only wonder if you’re waiting for things to get worse before you act as some people suggest. A simple yes or no would go a long way towards calming things down especially in the financial markets.

You’ve already spent $2.3 trillion buying bonds and mortgage-backed securities. Spending another $267 billion strikes me a little like giving yourself a transfusion – only you’re taking blood from your left arm and putting it back into your right arm.

The labor participation rate is at a 30-year low and I am sure most Americans who are either seeking employment or working now would like to know why. So would those who have given up. Many I’ve talked to would actually like to come back as productive members of society again.

At what point are you willing to admit that what you’re doing isn’t working?

Is it $10 trillion? $25 trillion, even $100 trillion – please just commit to a figure so that we will know when this madness will end. And how to live our lives in the meantime.

Since we moved away from the gold standard in 1971, the Fed has effectively printed money every time the stuff has hit the fan. Most recently:


1998 when Russia defaulted and LTCM crashed

2000 after the dot-com bomb exploded

2001 following the horrific events of 9/11

through 2005 to balance out the housing bubble caused by too much cheap money in the first place


Minus the growth of the 1950s and early 1960s, it seems to me that printing money has been the Fed’s mantra since the Great Depression 80 years ago.

I don’t see how our leaders and, by implication, you, can possibly make the argument that we need more time to give everything a chance to play out and for growth to ignite and expect Americans to buy it any longer.

What I am suggesting is hardly new. In fact a New York senator named Elihu Root warned about the dangers of easy money in 1913, which I am sure you know, is the year in which the Federal Reserve was created.

At the time, Root noted that the “expansive” policies of the day would “enlarge business with easy money” but ultimately would lead to a crash when “credit exceeds the legitimate demands of the country.”

His warnings should sound hauntingly familiar, as should his observation that the boom and bust cycle leading up to the Fed’s creation did not happen in isolation. Root suggested that this would be self-evident to serious economists of the day if only they would look at the panics of 1837, 1857, 1873, 1893 and 1907.

At some point, Chairman Bernanke, you’re going to have to acknowledge reality. Printing money has never worked. The Fed’s policies not only inflamed the financial crisis that set off the Great Depression in 1929, but directly contributed to the size of the financial bubble that has now burst and the deleveraging that’s under way at the moment.

Even the biggest theories fall once proven beyond a shadow of a doubt they don’t work or aren’t true.

Most flat-earthers gave in around the 3rd century BC. Geocentrics were relegated to the sidelines by Galileo and Copernicus in the 16th century.

The lack of objective evidence in support of additional monetary stimulus or accommodative policy is mounting by the day. Myths remain only because people use them to interpret reality until they know better. The fact that millions of people believe something is true does not make it so.

You tread a very fine line in that sense if for no other reason than myths are also frequently spread and reinforced by those in charge who are believed to be credible.

The reality of the situation today is that cheap money and low rates coupled with an out-of-control banking system, government guarantees and credit insurance actually encouraged riskier behavior leading up to this crisis and continue to do so today.

So again, I ask respectfully Chairman Bernanke, what’s your number?



Keith Fitz-Gerald

for The Daily Reckoning Australia


Ed Note: This article originally appeared in Money Morning USA

From the Archives…

The US Deficit of Deceit
2012-06-22 – Greg Canavan

How Nice to Have Friends At the Fed
2012-06-21 – Bill Bonner

Deep in the Stock Market Trenches
2012-06-20 – Murray Dawes

In Praise of the Eureka Rebellion
2012-06-19 – Dan Denning

What Could Possibly Go Wrong With Infrastructure Investment Bonds?
2012-06-18 – Dan Denning

The Daily Reckoning
The Daily Reckoning offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, The Daily Reckoning delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, The Daily Reckoning is published in 7 countries with a worldwide readership of almost 1 million people.

Leave a Reply

4 Comments on "An Open Letter to the Fed: What’s Your Number Ben Bernanke?"

Notify of

Sort by:   newest | oldest | most voted
4 years 3 months ago
Dear Mr Fitz-Gerald, Thank-you for your letter. The number, in answer to your question, is the one that breaks the bank. What I am doing here is playing my part in laying the foundation for the next upwave. To force the restructuring, so as to enter the information age proper, I need to play my part in loading up the global economy with as much debt as possible so that when the ‘bubble’ burst the hard decisions will be made that would not otherwise be made. So If your business goes bankrupt during the Great Depression then it was not… Read more »
4 years 3 months ago

The numbers that bear watching right now are the soft commodity prices. Wheat at +USD7.50/bushel. If they can’t wash USDs with ore prices due to lack of demand what is the next step? Unlike hard to govern demand they can play dirty with supply on soft commodities.

4 years 3 months ago
The sad reality here is that Mr. Bernanke hasn’t worked a day in his life in a real business and therefore does not “have a number”. To even consider having a number would be a tacit admission of the possibility of failure and that is intolerable. He is still flailing through the idiocy of Keynesian economic theory that claims what he is doing is correct and will work. Unfortunately for this school of thought, it is failing and miserably at that. The unintended consequences of Keynesian economics is exactly what we see happening today. Practically all of the western nations… Read more »
4 years 3 months ago

I think Benny is doing just fine….depending on what you think his real objective is. Trying to save the American economy? Give me a break.

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to