Bernanke playing with fire and burning his fingers... or outright brilliant?

This week is the second round of Quantitative Easing in the American market. Bernanke throws another 600 billion into the market to boost the US into economic growth. Most Dutch economists have mixed negative feelings about this and point out that the US Fed are choosing the lower interest policy weapon since the Asia crisis, to boost the economy. But we should note that the US Federal Reserve has a dual mission. They must:
- guard the monetary base / interest rate and stability of the coin AND
- create employment,
as compared to the European Central Bank that must only:
- guard the stability of the coin / monetary base / interest rate.

Why this interesting difference?

It is all because of the previous crisis, more than 100 years ago in the US, when the Fed was founded and when there was a huge unemployment. That resulted in the inclusion of the employment goal into the FED mandate. And its this goal that is now leading the US Federal Reserve Board to fill up the tank with more gasoline, when it's already full. And we all now what happens in such a case: spill-overs.

The size of the American economy is one, that results in spillover effects that will travel the whole world. Other currencies are experiencing the pressure and one only hopes that the American motor will indeed kickstart as a result of the easing. The latest unemployment data of the US appear to be hopeful, but then again: no one is solving the Fanny and Freddy problem. And we are only starting to discover what the effects will be of the robo-signing during foreclosures in the USA.

So, while in the US we see some extra demand for Treasuries now that Uncle Ben is out shopping, pension funds all over the world are choosing a hands-off approach of periferal treasuries. And that leaves us in amidst historical times that only afterwards allows us a final verdict on Bernanke: was he burning his fingers or being outright brilliant?