This article feels late, and not looking at the whole picture. This passage is what alarms me most.

"What's more amazing is that these radical and exceptionally aggressive reflation attempts have taken place in response to a minor decline in consumer prices and no decline at all in the money supply."

They claim the radical reponse is in reaction to a "minor decline". I think they are looking at the wrong chart, and the real reason for the radical response is all about housing prices, not consumer prices. In fact, the whole article doesn't even mention the word "foreclosure" once!

The fed is having much more trouble re-inflating than it hoped. The money is not being channelled correctly, and that increases the risk of overcorrection. They want to do, say, $10 worth of good in the housing sector, but only 20% of the money they spend ends up there, and so they have to spend $50 is reach the goal. Now, just add 11 more zeros, and you have something close to what's happening.

I think they need to move fast to put in controls before the overcorrection becomes too severe. When housing prices do rebound, they may rise 50% in less than five years, which would be very very bad, even starting from now or 20% down from now. We need housing prices that rise only 3% a year, more in line with general consumer inflation.

Mortgage rates dropped like a stone in november and december. This may be great, but may lead to more pain down the road.