As the markets settle down after the big move by the central banks to stabilize the situation in respect of Europe, we find ourselves thinking of the speech the Federal Reserve’s Ben Bernanke gave at the National Press Club on November 21, 2002,* when he was but a governor and not yet chairman. The speech, entitled, “Deflation: Making Sure ‘It’ Doesn’t Happen Here,” offered an explanation of how the Fed would operate, hypothetically, once it had already brought its main monetary policy tool, the Fed Funds rate, to zero.

It was this speech that contained the reference to the Fed’s ability to print dollars that earned Mr. Bernanke the sobriquet “Helicopter Ben,” after Milton Friedman’s explanation that the Fed could figuratively drop money from helicopters if it had to. Now that the Fed has held the Fed Funds rate near zero for several years and has committed to keep it there at least through mid-2013, the speech has turned into a kind of playbook or checklist of all that Mr. Bernanke has done since and may yet do.

The famous footnote came in where the chairman, in the course of explaining the ways in which the Fed could inject money into the economy, asserted that that the Fed “has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt.”

There the Fed’s own publication of the speech offers footnote 16. “The Fed,” it says, “has committed to the Congress that it will not use this power to ‘bail out’ foreign governments; hence in practice it would purchase only highly rated foreign government debt.” We wonder if anyone in Congress other than Ron Paul will remember this commitment. “Highly rated government debt” seems such a quaint concept today, nine years later, especially since the United States itself has been downgraded. And the commitment to not “bail out” foreign governments seems practically naïve given what has transpired during the crisis.

No doubt the Fed will insist that on various technical grounds joining in the coordinated move to use swap lines more aggressively does not amount to a ‘bail out’ of foreign governments. Fair enough. One could spend the rest of one’s days parsing the paltering among issuers of fiat money. But given the relationship between European governments and European banks and, for that matter, the Euro itself, it strikes us that the Fed is skating close to the line it promised Congress it wouldn’t cross. The fact is that it is becoming ever clearer by the day that the Federal Reserve is now the central bank to the world.

At some point one would think Congress would want to get in on this question. It established the Federal Reserve, after all. It established the dollar as the American unit of account, for that matter. One would think it would have its own interests in respect of whether the Fed is supposed to be the central bank of the world. Is it supposed to look out for both price stability and employment on the continent, like it is here? And against what sort of standard is it formulating policy in respect of the Euro? Few in the Congress are focusing on this issue, and only Congressman Ron Paul is working the issue on the stump. Eventually, though, the election will be over and there will accede a new Congress, the 113^th, in which this will be one of the most urgent questions.

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* The value of the dollar on that day, incidentally, was a 317.65^th of an ounce of gold, according to the Kitco historical gold chart; the greenback’s value has since plunged to below a 1,740^th of an ounce of gold.