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So I guess the solution for the collapsing housing bubble is to create a currency bubble? Great idea! Hey, this won't cause inflation will it?
At this point, Bernanke is basically financing the national deficit by buying debt issued by the Treasury. In addition to capping Treasury yields, expanding the Fed’s balance sheet and printing more money to accommodate these purchases has sharply undermined the value of the dollar.
By allowing the dollar to weaken, Bernanke is basically betting inflation will not return in force for sometime. Analysts are split on the tactic.
Some analysts believe the central bank has little choice but to put concerns about inflation aside for now and focus on sparing the economy a far worse collapse. But others, like Michael Farr, president of Farr, Miller & Washington LLC, are far more skeptical.
"Looking ahead, we fear inflation,” Farr told MarketWatch. “It may be that Dr. Bernankenstein has created a monster beyond his control.”