What is he doing?

Bernanke just doesn't get it: the availability of currency is not the problem just yet, except that there may be too much.

On the other hand, Mercury News columnist Vindu Goel does get it.

Here are two important points made:

The Fed's deals ultimately transfer a lot of risk from private companies to the taxpayers. And that sends a bad message to the next generation of risk-takers: It's OK to gamble big because the government will protect you from losses.

The economists call this "moral hazard." It's the same whether the gambler is a bank or a family that doesn't buy flood insurance and counts on federal disaster relief to pick up the slack.

"If people don't bear the costs of their actions, they impose a cost on society," said Tom Davidoff, an assistant professor at University of California-Berkeley's Haas School of Business. In the case of Bear Stearns, "You have an investment bank that lost a bunch of money because they made some bad gambles. Will this induce banks in the future to say, 'Heads I win, tails I win, because I'll get bailed out.'?"

and

As the dollar keeps reaching new lows against the euro, the yen and other foreign currencies, consumers and businesses could see rising inflation here at home.

And once inflation gets going, it's difficult to tame, as anyone who lived through the 1970s will remember.

Fundamentally, the Fed's recent burst of activity smacks more of panic than sensible economic policy.

Bernanke and his colleagues ought to give the financial system a little time to adjust to the banks' massive loan write-offs, six rounds of Fed rate cuts, the upcoming tax rebates and rising commodity prices.

If a few financial institutions fail, so be it - they'll be more cautious next time. If some homeowners lose their houses, well, "every time there's a foreclosure, that's a buying opportunity for someone," said David R. Henderson, a research fellow at Stanford University's Hoover Institution.

Not only does it appear that the Fed is panicking, but, as others have pointed out, it looks like the Fed is ignoring the 70s and ignoring inflation (not to mention making the dollar weaker and making my upcoming trip to Europe even more expensive). Unsurprisingly, the stock market is already down today after it's exuberance from Tuesday.