My Letter to the WSJ re: A Carpenter With Only One Tool

From: patrickbarron@msn.com
To: wsj.ltrs@wsj.com
Subject: Carpenter with only one tool
Date: Wed, 27 Oct 2010 15:51:21 -0400

Re: Fed Gears Up for Stimulus

Dear Sirs:
The Fed is like the carpenter with only one tool, a hammer, who sees every problem as needing a good pounding. The Fed's only tool is the monetary printing press, so it sees every economic problem as a lack of money. According to your report, "The Fed's aim is to drive up the prices of long-term bonds, which in turn would push down long-term interest rates." This statement, which undoubtedly is true, illustrates perfectly the Fed's chief policy error. It has no regard for the role that savings plays in an economy. It is savings that the economy needs in order to rebuild the malinvestment of the lost decade of this new millennium. Savings is the fuel of capital investment. Without savings a modern economy will fail to replenish its capital stock. Ours is being consumed in an orgy of wasted government stimulus spending. Already the poor saver is getting next to nothing for his money, and Bernanke would drive him completely out of the market. If he succeeds, and it seems likely that he will, our economy will resemble that of Argentina in a few years--a once prosperous country driven to default, hyperinflation, widespread poverty, and political tyranny.

Patrick Barron