The real story yesterday wasn't that, after putting on a good carnival act, the Senate confirmed their insider, Ben Bernanke, for a second four-year term as chairman of the Federal Reserve. No the real story was buried in a Bloomberg piece, 19 paragraphs down.
As I reported earlier, the Fed is thinking of adopting the interest rate on reserves as their key monetary policy target rate. This is important.
They are using the excess reserve rate to control monetary policy in a de facto way now, but officially recognizing what the Fed is doing will put more power to inflate in the hands of Washington D.C.
As I regularly point out, short paragraphs and clauses are put into legislation that few understand but that can have enormous and powerful consequences.
Bloomberg points out how such a short clause on recognizing reserve rates as the target rate will have profound consequences: