Oh where to start with this one. We wrote yesterday about Senator Hagan's brilliant Fed insights (or, at least the variety that comes from having none). We hope readers have had a chance to ask Kay Hagan any questions they may have about the Fed's ability to contain the next multi-trillion monetary implosion in light of a total lack of knowledge about the Fed's activities, as we are confident she will answer any and all questions. It appears that she now has the fervent fact-checking support of Republican Arizona Senator Jon Kyl, who is opposed to the Federal Reserve Sunshine Act (S 604) on the grounds that any Fed "disclosure could unnecessarily raise concerns about the financial condition of the recipients, cause consumer and investors to lose confidence in them, and worsen their balance sheets (along with the credit crisis that the Fed is trying to solve)."
We appreciate Senator Kyl's candor even if he seems to have confused the words "unnecessarily" with "necessarily" and "solve" with "create." But we are confident his position, once again, stems from his risking his political post and credibility on the premise of Fed "dollar destruction" containment. We are eagerly waiting for Senator Kyl's freeform thoughts on what provides him with such confidence.
Another topic, highlighting Senator Kyl's erudite comprehension of matters monetary is his disclosure vis-a-vis the ongoing $1.7 trillion Fed monetization program (sorry, we meant, Quantitative Easing - after all there are whopping 30 minute intervals between agency auctions and repurchases: are we going to split hairs here).
I would observe that Congress provided the Federal Reserve with a great deal of independence in order to ensure that control over the nation's money supply is not influenced by short-term political or partisan pressures - pressures that could otherwise result in the temptation to use the government's money-creating authority to finance government expenditures (including budget deficits). Such "monetizing" of the debt - that is, financing deficits or paying off the national debt by printing more money - would lead to rampant inflation. I, therefore, support the independence that has been carved out for the Fed in matters of monetary policy to protect against that kind of abuse.
It is refreshing that the Fed's independence has led to such normal outcomes as 97% of positive trading days at such institutions as Goldman Sachs, and principal trading at the major investment banks (a trade, by the way, which has a losing counterparty, known as the US taxpayer) being the only source of record revenues this quarter, in many cases by a margin of over 80%. Yet we completely agree with the Senator on the threats of monetization: it would be truly unfortunate if instead of dabbling in semantics, Ben Bernanke decided to rename the upcoming QE 2 program into "Monetization for a Stronger America." It would be very scary if at that point the Fed has some accountability as it may become overtly obvious that the Fed is printing trillions of money, lending quadrillions, and collateralizing everything with pennystocks. Concerns about our future would then be truly "unnecessarily" raised.
We ask readers to write their congressmen to see how many of them are as well-versed in all matters pertaining to the Federal Reserve, and to send us the responses. We will happily disclose just who it is in the US Senate who believes that an American system that encourages reckless risk taking and makes billionaires out of millionaires, even as it destroys the middle class.
A very unperturbed letter from Sen. Kyl below.