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Janet “Lightyear” Yellen gives the market just what it wants: more stimulus! As she recently sailed through her Senate hearing, Yellen delivered dovish comments that strongly suggest that the U.S. economy can count on more stimulus support (quantitative easing) for a longer period of time than anyone anticipated.

A detailed reading of her comments reveals that the Fed has “more work to do” to help the economy. Nowhere in any of her comments was there even a hint of “tapering.” Sure enough, U.S. stock futures hit a record high following these comments.

For the record, Yellen said “you (do) not see stock prices in territory that suggests bubble-like conditions.” I believe it was her predecessor and mentor Ben Bernanke who said exactly the same thing in front of the housing market bubble.

Because the Fed has an almost perfect record of being 100 percent wrong in terms of prognostications, this should give all investors pause. However, in all likelihood it won’t. Asset bubbles are driven by emotions – greed, to be specific. And greed does not abate gradually. It is shattered by trauma and replaced by fear.

I fear that in the long run the current measures of asset purchases and artificially low interest rates are not a temporary expedient, but the new direction of long-term Fed management of the economy. Fast forward to 2020 and you have a Fed with a balance sheet of $10 trillion in assets vs. a mere $3 trillion today. Unwinding this in anything other than a catastrophic manner is next to impossible – even without the participation of other central banks around the world.

With everyone else on board, a global unraveling similar to 1929 may be unavoidable. This is because each nation ultimately will act in its own rational self-interest, and depart from this course even if it is detrimental to the general interest. When this happens, barriers go up and the downward spiral begins.

In the interim, retirees, pensioners and savers continue to be crushed. Current interest rates for many passive investments are below the inflation rate. This squeeze will only be exacerbated if policy makers follow Yellen’s urgings to accept higher core inflation as the necessary prerequisite for promoting full employment. How do these innocents preserve their wealth or maintain their lifestyle in the face of this onslaught? The simple answer is they don’t.

If this is really the case, why go down this path at all? In its simplest form, the Fed is little more than an economic central planning agency staffed by unelected, unresponsive career government bureaucrats. I know history isn’t taught (not relevant) in schools anymore, but communism failed precisely because centralized economic planning doesn’t work. Yet we see central banks around the world assuming an ever greater role in our affairs.

Strangely enough, even though these institutions and their staffers have a greater impact on financial markets than anything else, they are seldom held responsible for their misguided actions. They simply segue from the global stage into genteel retirement where hagiographic biographies are written about them (think Alan Greenspan and “Maestro”). In the meantime, taxpayers, retirees, pensioners and savers can go fish.

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