The Web is heating up over the way the Federal Reserve’s volcanic expansion is illustrated in what is being called “The Magma Chart.” Ira Stoll, who has been noting the story at Futureofcapitalism.com has coverage and a piece up at Pajamas Media. Mr. Stoll picked up on a blog post by the New York Times’ Catherine Rampell, who provided, in addition to her comments, a link to the chart as produced by the Cleveland Fed. It shows the various elements of the Fed’s balance sheet and how they exploded in the last quarter of 2008. Toward the beginning of 2009, they hit a peak of nearly 3,000,000 millions of dollars, or $3 trillion, and more recently have leveled off, at least for the moment, at $2 trillion.

What catches our attention about this chart, aside from its graphic illustration — Mr. Stoll notes that it calls to mind a wall of magma, or lava, flowing down hill — is that the “dollars” in which the Fed’s balance sheet is denominated aren’t actually dollars. This is a point made over and over again by such partisans of constitutional money as Larry Parks of the Foundation for the Advancement of Monetary Education. The Fed uses the word dollars, and what it calls dollars have been credited as legal tender by the Supreme Court. But such dollars are not dollars under any definition consonant with that understood by the Founders of America when they twice used the world “dollars” in the Constitution. By a dollar they meant 371 ¼ grains of pure silver or the free market equivalent in gold. The constitutional dollar was codified in Coinage Act of 1792, which adopted the dollar — something that already existed — as the new nation’s unit of account.

So while the chart is displaying an enormous expansion of the Fed’s balance sheet, it is not displaying a relation between the magma of the various balance sheet items and something real. This, in our opinion, is where the Fed and the Congress are vulnerable. Even as we write this, the Drudge Report and the Huffington Post are leading with dispatches, here and here, about the latest warning by the president of the Federal Reserve Bank of Kansas City, Thos. Hoenig, who has been dissenting for months from the Fed’s ultra-low-interest rate policies. His warning is that that low interest rates themselves are part of the problem. More fundamental, in our view, is the fact that the idea of a group of officials of the Fed deciding rates by fiat, without targeting the constitutional definition of our money, is coming to be seen as itself the most important part of the problem.

As this crisis grows, the idea of the Fed itself is going to increasingly come into question, and calls will grow for replacing the magma building up on the Fed’s balance sheet with the concept of constitutional money, which is silver and its free market equivalent in gold. It is well to remember that the movement to audit the Federal Reserve, which has come to encompass a solid majority of the Congress, was launched by a congressman, Ron Paul, who doesn’t believe the Fed should exist at all and who, according to one recent poll, was running even with President Obama. Those facts don’t a monetary reform make, but they certainly suggest which way the wind is blowing.