Steven Pearlstein is my hero

Okay that's a bit of an overstatement. But the Washington Post columnist absolutely "gets" it when it comes to this economy and the Fed's response. Here's the "money section" from his latest piece:

"What we're witnessing here is pretty simple: another bubble in financial assets. All that "liquidity" created by the Federal Reserve and other central banks has accomplished its task and prevented a global financial meltdown. But unless they move now to begin sopping up that liquidity, the central bankers run a serious risk of reinflating many of the same bubbles that got us into this mess in the first place.

"Many analysts now look at the economy and conclude that unemployment is still way too high and the threat of inflation still way too low for the Fed to even think about beginning to raise interest rates again. By one calculation, the appropriate federal funds rate today would be something like negative 5 percent. Since that's impossible, the Fed has signaled that it would not only stick by its zero-interest-rate policy for the indefinite future, but also will continue to inject additional money into the financial system by using freshly printed dollars to buy up the debt issued by government-owned Fannie Mae and Freddie Mac.

"The problem is that because we didn't get into this recession in the normal way, the normal analysis and remedies are not appropriate. Slow growth and high unemployment are indeed going to be a big problem over the next several years, but they aren't going to be solved by pumping out lots of cheap money that is used to speculate in stocks, bonds and commodities rather than be invested in the real economy. And if all this speculation has the effect of driving up the price of commodities and driving down the value of the dollars we use for imports, then it is perfectly possible to wind up with high inflation and high unemployment at the same time -- as happened in the late 1970s."