True, Safetalker, but all government actions to distort the free market have unintended consequences and, in this case, they're pretty easy to predict. First of all, Bernanke is reinflating the housing market - which is another way of saying he's creating a new housing bubble.

Bubbles don't last forever. At some point, they burst. Sound familiar? And I have to believe that even a committed Keynesian economist like Bernanke knows this.

The only thing I can figure is what Hunter Lewis suggested, that he also plans on using his printing presses to buy government securities that he can't sell in the auction marketplace. Nothing new there, either - that's what QE1 and QE2 were all about. the government can't sell all of the bonds it ants to sell? No problem! Just have the Fed buy them, with dollars it creates!

Of course, there is a price to pay for this. Your credit rating tends to get downgraded. Credit rating agencies know the only way out of this is for the government to turn off the printing presses and stick to a pretty austere (and constitutional!) budget, or create so much money and debt that no one will want either of them. (See Zimbabwe, Greece, etc.)

Bernanke is playing a dangerous game, hoping the president and Congress will do the right thing in time. He's a smart guy, so he must know the consequences if and when this whole thing suddenly goes south. But, as long as the Euro is inshambles, the Middle east stays in turmoil, and the Chinese government mismanages its own economy, he'll likely get away with it.

At least temporarily.

Onward and upward,
airforce