To: Mitch McConnell, John Boehner, Jon Kyl, Eric Cantor
CC: Rick Perry, Michele Bachmann, Ron Paul
From: Ben Bernanke
Re: "Extraordinary intervention" letter of September 20, 2011
When I first glanced at your letter of Sept. 20, 2011, I thought you were making serious recommendations about monetary policy. But then I realized it was an ironic joke. We're a serious bunch here at the Federal Reserve, and we don't enjoy much occasion for jocularity these days. But your letter has provided some much-needed comic relief.
We are particularly amused by your reference to Fed actions that "have likely led to more fluctuations and uncertainty in our already weak economy." We here at the Fed watched in awe this past summer as you and your congressional allies demonstrated your vast power to create "fluctuations and uncertainty," by threatening to default on trillions of dollars' worth of U.S. debt. That triggered the first-ever downgrade of the nation's credit rating. The stock markets tanked. Consumer and business confidence plunged. You guys rock! Fluctuations and uncertainty indeed! So we humbly express our thanks for your insights on how to wreck the economy. (Heh-heh, I'm still chuckling.)
As you requested, I have shared your letter with my fellow members of the Federal Reserve Board of Governors. They, too, got a few giggles out of it. Among other things, we enjoyed your feigned ignorance of the Fed's structure—especially since Congress created the Fed. It's the Federal Open Market Committee that determines monetary policy, not the Board of Governors. The FOMC includes the members of the board, as well as five of the 11 Reserve bank presidents, who rotate in and out of the FOMC for one-year terms. But you knew that! In case your children would like a primer on the Fed, however, we do have a "kids page"on our website that adults are free to "monitor"—you know, to make sure we aren't exposing them to immoral mesages about the virtues of inflation.
Even though you didn't ask, I have taken the liberty of sharing your letter with the additional members of the FOMC. They could use a laugh too. In fact, we opened our most recent FOMC meeting by going around the table, with each member indicating what he or she thought was the funniest part of your letter. A few highlights:
Bill Dudley was amused by your request that we show "quantifiable benefits to the American people" that have come from our actions. "Quantify this!" he hollered. That remark might have been a bit crude, but you know Dudley. The point he was making, I think, is that the Fed would be pleased to develop an econometric model of its effectiveness. Dudley went on to suggest that we develop an indexed methodology that measures the effectiveness of all branches of government and compares them to each other. The effectiveness of the legislative branch, of course, would be measured based on the quantity of words generated, not on the amount of legislation passed.
Elizabeth Duke chortled when she read that "it is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate." "Ya think?" she hollered, as the rest of us nodded in nervous agreement. For the last year or so, we've been desperately hoping that Congress would do something to help the economy, so we can stop experimenting with stuff we don't know that much about. Just between us, we really don't think there's much we can do at this point to make the economy grow or bring back jobs. You summarized our view with artful comic understatement. Well done!
Narayana Kocherlakota could barely contain himself when he read that our policies might prompt "more borrowing by overleveraged consumers." "Okay then!" he blurted out. "Nobody spend anything! Save all your money!" The whole FOMC cracked up at that one, since everybody knows that the result of a credit freeze on an economy driven largely by consumer spending would be: a depression. "Let's relive the 1930s!" Narayana added. Don't worry, he was kidding, just like you. He only meant that poor people without access to lobbyists or federal favors should relive the 1930s.
Your worries about a weak dollar led Charles Plosser to exclaim, with mock seriousness, "A strong dollar is in America's interest." That drew another round of guffaws, since, like you, we know that this outdated slogan dates to a time when Americans built many of the world's most desirable products, and U.S. firms didn't need help exporting their goods or competing with cheap stuff made overseas. Yeah, we long for those days too, and like you, we hate paying the equivalent of $30 for a decent glass of Bordeaux when we travel to Paris or Davos. (Oh, right--lobbyists pay for all your meals and drinks, wink wink.)
Richard Fisher, who has disagreed recently with some FOMC decisions, had an idea when he read your point about dissension here at the Fed over our own policies. "I know," he said. "Let's all sign a pledge! We'll just do whatever the chairman tells us to do. We'll never disagree about anything, and it will be so much easier than having to think." Several other FOMC members joined in the gag, and a chant briefly erupted: "Pledge Don't Think! Pledge Don't Think!"
We have one suggestion. You wrote that "the American economy is driven by the confidence of consumers and investors and the innovations of its workers." Why not add that a sound economy also depends on the competence of the nation's politicians? We think that assertion would be uproariously funny, since polls show that Americans hold Congress in far lower esteem than the Federal Reserve. The idea that coherent, bipartisan policymaking might help the economy is so fanciful that we think it would be intuitively hilarious.
There's one last thing I'd like to add personally. Rick Perry, Ron Paul, and Michele Bachmann didn't sign your letter, but they've echoed your sentiments by calling our actions "treasonous," insisting that the Fed should be abolished, and fretting that inflation, which is running at less than 3 percent so far this year, will soon became a runaway problem that rampages across the land. We at the Fed are mostly dull, geeky folks with Ph.D.s who wield nothing more threatening than an occasional spreadsheet. We are frankly flattered by all the attention, and by the suggestion that we are money-printing rebels. There's a new swagger in the halls here at the Fed, as we try to fit into our new role as monetary roughnecks. Fisher even bought cowboy boots. Thanks for helping America notice us.
Yours in Jest,