Regular readers of these columns will be aware of our enthusiasm for the newsletter known as Grant’s Interest Rate Observer, but even by that measure the issue just out is memorably wonderful. Its lead essay “‘Exceptional’ is the word,” is about what it calls American monetary exceptionalism, or the “reserve-currency privilege.” Quoth Mr. Grant: “We judge that a fair share of the world’s financial drama is attributable to the unanchored monetary system. Prices and valuations hang by the insubstantial thread of manipulated currencies and inflated credit.”

Mr. Grant sketches all sorts of scenarios for what could happen, including a crisis of the euro, and notes that the United States, for all its problems, “remains the world’s destination and just as it draws people, it might well draw their money in a Europe crisis,” leaving “champions of sound money to gnash their teeth.” But he argues that while American exceptionalism may be a bullush doctrine, “Not so American monetary exceptionalism.”

Reading Ben Bernanke’s February 3 speech before the National Press Club — in which the Fed Chairman said, as Mr. Grant put it, that with “ ‘core’ inflation registering just 0.7% in 2010 the Fed would seek a slightly faster gait of debasement” — Mr. Grant remarks that one can see “the outlines of potential disaster begin to form.” Maybe, with the Fed so confident of its ability to manipulate markets, a third round of quantitative easing. Quoth Mr. Grant: “An unanchored currency presents a temptation that mortal man finds irresistible.”

Mr. Grant concludes by quoting Mr. Bernanke as suggesting that the “two most important driving forces for the federal budget deficit are the aging of the U.S. population and rapidly rising health-care costs” Mr. Grant begs to differ. “The most important driving forces for the federal budget deficit are the reserve currency privilege and stunted funding costs.” He says the Federal Reserve is “directly responsible” for the second problem and “seemingly oblivious” to the first. “if monetary turmoil were a stock,” he concludes, “we would be bullish on it.”