Bernanke's Waterloo

It's come about even faster than his most ardent critics could have predicted. Ben Bernanke has finally fallen off the helipad of his ivory tower. In his latest statement, Bernanke is urging yet more government action.

Having realised that the series of uncoordinated and half-baked responses aren't making any difference, the Fed Chairman is more or less shrieking desperately bad ideas to anyone who'll listen. Something along the lines of "buy delinquent mortgages, approve the FDIC mortgage guarantee proposal, subsidize Ginnie Mae rates!"

Let it not be said that these ideas haven't been evaluated by Ben. True to his academic roots, he has carefully analysed the sources of fund. They will require "some commitment of public funds" - i.e. even more taxpayer capital at risk.

It goes without saying that running the money press 24/7 may help fund the paper game of buying up all this mortgage debt junk for the state balance sheet. Yet in the long run you can expect inflation to roar back to life. I wonder if the Fed will rack up the rates as fast as they cut them? In any case, those treasury yields will be moving back north soon.