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The Fed’s conundrum now is how and when to pull back from its massive and historically unprecedented campaign of monetary easing. The tremendous surge in stock prices the past four and a half years has been supported almost exclusively by Federal Reserve monetary policy. The Fed’s zero interest rate policy inflated market valuations as income-starved investors had nowhere to go but the stock market to find dividend income and capital gains.

Now, if the Fed pulls the plug on this massive pool of liquidity too soon, down the market will go. If the Fed waits too long, a new rate-induced bubble will pop and down she will go again. Ben Bernanke (or his likely successor, Janet Yellen) is darned if he does and darned if he doesn’t.

It’s no wonder that Helicopter Ben (so named for his infamous quip that if things get bad enough, one can always drop money out of a helicopter) doesn’t want to stick around. It’s better to leave a hero than a heel.

Once again, it looks like the noble pursuit of economic stability may very well result in increased instability. Did anyone ever think of just leaving the marketplace alone to sort itself out? Of course not. That would mean the political class needing to find real jobs.

This mendacious meddling does, however, characterize how the Fed has historically “managed” the economy. Long before the age of Greenspan (Alan, that is) we have been staggering like a drunken sailor from one economic bubble to the next.

Lost in the mists of time to a historically illiterate culture lies then-Fed Chairman Arthur Burns and the great 1970s stagflation bubble. In a successful attempt to re-elect Richard Nixon and stimulate the economy, he was the first to open the monetary floodgates. Unfortunately, this action also unleashed runaway inflation.

Enter Paul Volcker, that prince of monetary darkness, to slay the dragon unleashed by his predecessor with double-digit interest rates.

Fast forward to the maestro, Alan Greenspan, and a return to a looser monetary policy. This of course ended in a stock market bubble and crash to rival that of 1929. Irrational exuberance, anyone?

When all that cash went to money heaven, the Fed lowered interest rates yet again. This, along with debasement of underwriting standards – brought to you by Barney Frank, Chris Dodd and Maxine Waters – ignited the now infamous housing market bubble.

When housing fell off the cliff, Greenspan’s successor, current Fed Chief Ben Bernanke, rushed into the breach, lowered interest rates to near zero and started printing money. It’s this runaway monetary policy that has restarted a new rate-induced bubble we are living through.

However, even with all this extra juice, the economy remains questionable. Unemployment remains historically high, at 7.6 percent.

As far as the housing market recovery is concerned, even Robert Shiller of the famous Case-Shiller home price index sees storm clouds gathering on the horizon. He recently told reporters, “All this talk that we’re in this great recovery – we probably are in the short run, but the longer run doesn’t look so terrific to me.” He also notes that “we’re living in a totally artificial real estate economy.”

In case you didn’t know it, regular homebuyers are competing against a new force in the marketplace: hedge funds and private equity firms. According to some reports, these institutional investors may account for up to 70 percent of home sales in markets like Florida, Nevada and Arizona.

I guess the takeaway from all of this should be that easy money can’t solve all problems. Since the end of the Great Recession, central banks have been printing money like mad to revive moribund economies. Unfortunately, it isn’t working. Last year the global economy grew at a little more than half the average annualized rate of the early 2000s.

With the stock and bond markets swooning at the mere mention of tapering, investors should realize there is no easy way out. Whenever the exit does occur, price action will be violent. There is no easy way off of the monetary junk.

Robert Smith is president of Peregrine Private Capital Corp., based in Lake Oswego. Contact him at 503-241-4949 or at www.peregrineprivatecapital.com.