Chairman Bernanke: As Part of Essay

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The Fed must not condone 'irrational' market exuberance once again, as it did under your predecessor Alan Greenspan's now much-criticized stewardship.

Thirdly, one of the initial criticisms of your 'loose' money policy during the crisis was that by encouraging consumers to borrow and spend, it was merely exacerbating the behaviors that gave rise to the credit crisis as a whole, namely the tendency for American consumers to spend money they do not possess. While a near-zero interest rate for both consumers and banks may have been salutary during the depths of recession and despair, in the long-term it is necessary to encourage consumers to save as well as spend. American consumers have one of the lowest rates of saving, and the highest rates of spending, of all the major industrialized powers. This is despite the tremendous prosperity American has enjoyed as a nation for many years.

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Americans need to reassess the balance between what they borrow and what they spend, to avoid America giving birth to a new generation of debtors.

Lastly, if the discount rate and the interest rate continue to remain low, responsible savers will find themselves unjustly penalized. Many conservative investors, particularly seniors, often use CD (certificates of deposits) as a means to have guaranteed income. CDs now hover at rates barely higher than savings accounts, while before the crisis individuals could invest their money in CDs at 4% and 5%. It is not fair that quite often the individuals impacted the most by low interest rates were those who saved their pennies and did not engage in wild speculation, or borrowing money in excess of what they had or could pay back.

Yours truly,….....

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