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The Federal Reserve seems to be trapped. The Fed is creating approximately 1,000 billion new US dollars annually in order to support the prices of debt related derivatives on the books of the few banks that have been declared to be “to big to fail” and in order to finance the large federal budget deficit that is now too large to be financed by the recycling of Chinese and OPEC trade surpluses into US Treasury debt. The problem with Quantitative Easing is that the annual creation of an enormous supply of new dollars is raising questions among American and foreign holders of vast amounts of US dollar-denominated financial instruments. They see their dollar holdings being diluted by the creation of new dollars that are not the result of an increase in wealth or GDP and for which there is no demand.

I was going to add this to my comment but got distracted: I had lunch with a friend that is in 'the financial market' and works for a major player (one of the stable ones). We were discussing the 'stock market bubble', fake housing 'rebound', Fannie Mae pumping etc. and he was doing his best to spin it positive, referencing the profits of all the major players on the market & every other spin point. Of course I shot back that the market gains have mirrored Fed pumping in QE, he shot back with something else and I mentioned the interest rate manipulation that, when it ends, the Fed Budget will be consumed in entirety by interest to service the debt, & on & on (parry/counter-parry).

We both agreed that everyone has an opinion on this but almost everyone agrees that the #1 problem is the deficit spending CONTINUING and that it cannot continue.

He suggested his own analysis is that he gives it 10 years; I said that was overly optimistic I asked him when he developed a problem with gambling...

And some people wonder why at every turn we seem to be saber-rattling, almost looking for a fight; almost sounds like a bomb-threat on finals day, doesn't it? /s