The Fed’s Kohn spoke today and, in a bout of honesty, said in essence that the Fed did not care about inflation and would do whatever it took to ensure that the economy continued to grow.

This should not be news. Now I don’t expect price inflation to develop into a wage-price spiral, in fact I expect the opposite. But it is worth noting that, over time, the Fed has destroyed the value of the dollar, which it is mandated to protect, by more than 95% since its inception in 1913. One should add that the root cause of this inflation is deficit spending by the Federal Government, but the Fed has monetized the debt and allowed the politicians to spend freely, without consequences. Get rid of the Fed!

His remarks are helping the dollar accelerate on its greased-crowbar descent. CAD is up four or five percent in just the last three or four days.

What Mr Kohn and Mr Bernanke need to understand is that, in the long run, undermining confidence in the currency is far more damaging than a recession. In many ways, the U.S. and the dollar are synonymous. As the dollar wanes, so will U.S. terms of trade worsen and the empire will fall. Just like Britain. Don’t imagine it can happen, the U.S. is so large and powerful? We’ll see. When I was a schoolboy in London, the maps of the world on the wall were still mostly pink, representing the empire over which the sun never set. Those maps were obsolete then, of course, but served to remind us of the rise and fall of empire.