Some poor sod soon is going to be named chairman of the Federal Reserve to succeed the celebrated but hapless Ben Bernanke, whose tenure in the job is drawing to a close.
Mr. Bernanke has presided over the final stages of the transformation of the economy into a house of cards -- a structure built on debt. He didn't design or begin the construction of the structure but he did raise it to unprecedented proportions. He probably will escape its collapse largely unscathed.
His successor is unlikely to be as fortunate.
The fundamental problem is that the Fed and our opportunistic and ignorant or unscrupulous politicians deferred the writing off of all of the bad sovereign, institutional, and personal debt, which always has been an essential prerequisite for a genuine recovery.
The Fed is in a trap. It has fashioned a bogus recovery. By endlessly and recklessly printing money it has debased the currency and created an illusion of recovery by again inflating the value of assets. It thus recreated the bubble that last brought the economy crashing down when it burst.
It now is recognized that this cannot continue. The mounting debt and the size of the bubble portend, and are increasingly recognized as portending a disaster of horrendous proportions. Continuing to increase them, although putting off the day of reckoning, is guaranteed to increase the severity of the inevitable outcome.
On the other hand even vague hints by the Fed that it will stop sustaining the house of cards brings brings down and threatens to collapse the inflated asset values immediately. In addition, such a collapse and the restoration of market level interest rates threaten the ability of governments at every level to service the debts they have incurred.
The real economy (as distinct from asset values) never has recovered. It still is staggering in disarray. With governmental policies poised to add to the distress, letting the air out of the inflationary bubble would lead to disaster.
So the Fed is trapped. It can neither continue on, nor abandon its present course.
Mr. Bernanke's successor will inherit the opportunity to take responsibility for the conundrum and its consequences.