The United States House of Representative
Sep 23, 2009
Section 22
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INFLATION IS COMING -- (House of Representatives - September 23, 2009)<p><center><pre>[Page: H9812]
(Mr. KIRK asked and was given permission to address the House for 1 minute and to revise and extend his remarks.)
Rep. Mark Kirk [R-IL10]:
Mr. Speaker, when interest rates go up, the value of bonds go down. But this presents a dilemma for the newest and largest bondholder on Earth, the Federal Reserve.
With interest rates low, quantitative easing policies and record spending, inflation is coming. Normally, we would expect the Fed to raise interest rates to protect the value of our dollars from runaway inflation, but now that the Feds owe over $1 trillion in bonds, an interest rate boost of only 70 basis points would trigger a loss of the entire $51 billion of the Fed's remaining net capital.
Robert Eisenbeis, the former vice president for the Atlanta Fed, has highlighted this danger. With inflation coming, we do not want the losses that the Feds would have to their own holdings to stop them from doing what will be needed to protect us, and especially seniors, from next year's expected inflation.
