Bernanke Will Continue To Lower Our Standard Of Living

To the Editor:

In 2008 all we heard about rising gasoline prices and its negative economic effects. Today all we hear about is the price of gold. Looking at commodities as a whole, gold prices have lagged compared to soft commodities like sugar, coffee, wheat, and orange juice, whose prices have jumped 25–60 percent. This is dangerous for our fragile economy and Ben Bernanke is going to make things worse. Every time he adds liquidity the US dollar loses value. The best way to combat a falling dollar is to buy commodities. This quick rise in the soft commodity market will negatively affect every American (unless you are a commodity trader). When sugar and wheat prices rise, goods like cereal, bread, juice, and condiments all rise. Therefore we spend more in the grocery store and have less money to spend elsewhere. Cotton prices have risen substantially, which forces clothing retailers to make a tough decision: lower prices or pass costs to customers. Neither will help the struggling retailers bottom lines.

The point I am trying to make is by devaluing the US dollar the Fed is guaranteeing a lower standard of living and serious risks of default in every aspect of the economy. For example, regardless of the price of food people need to eat. If the decision is feeding the family or buying new clothes or paying the mortgage, food wins. This isn’t good for the retailers (and economy). If the decision is to buy clothes for your children vs paying the mortgage, clothes win. This is disastrous for municipalities. If the mortgage isn’t paid, we can be sure the taxes won’t be paid therefore putting more pressure on the ailing municipalities. Municipalities will be forced to layoff, cut services, and in some cases like Harrisburg, Penn., file for bankruptcy. The ripple effects are so dangerous and Bernanke doesn’t get it. He still believes higher prices are the answer! Mr Bernanke, it frightens me that Washington looks to you as a problem solver when you don’t have the slightest understanding of the problem.

Daniel M. Patti, CFP

84 South Main Street, Newtown                                 October 5, 2010