Bernanke Between Inflation Or Investment Banks

The current market is alternating between liquidity worries and inflation fears. Helicopter Ben has to decide between bailing out greedy investment and mortgage bankers who got into trouble relying on the Greenspan put, or containing a risk of inflation stemming from global demand for energy and raw materials combined with money supply expansion from central banks that don't want their currency to be strong. (which is practically all of them) Mr. Bernanke also suffers from low expectations on the inflation fighting front due to his pre chairman speech about air dropping paper currency to stop deflation. All of this is reminiscent of the late 70's and G. William Miller which was not a terrific investment environment for equity markets, though a great period for futures markets. Perhaps that is why the CME stock price is so strong.
Jeff Matthews discusses inflation sightings at company conference calls this week:

There you have it: on top of “cost spikes,” “personnel and equipment shortages” and “dramatic” raw material cost increases, add the declining non-OPEC oil supply to the list of problems next week's Fed rate will exacerbate, as Bernanke continues his apparently ceaseless efforts to rescue Wall Street's banking goliaths from their self-created CDO tar pits.

Expect the Fed to give in and help out the bankers. After all there are future consulting jobs at risk here and no one wants to be blamed for a recession. For my part, I just hope Mr. Volcker is in good health 3 or 4 years from now when we need a fed chairman with balls.