Thursday's stock market decline was just what Ben Bernanke needed.
If people keep bidding up stocks with the cheap money he's handing out, he'll go down in history as the dumbest central banker ever, the one who blew a new investment bubble while he was still sweeping up the shards of the previous two.
But if he takes away the cheap money, unemployment goes toward 15 percent, the highest since the Depression. That won't help his reputation, either.
It'll be a close call. As global stock markets soar even while the "real" economy is terrible, policymakers risk wreckage whether they stand pat or take action. Such is the nature of the 21st-century economy, where we've borrowed about all we can borrow, cut interest rates to the arithmetical limit and tried to solve a debt disaster by creating more debt.
It's another reason to expect the recovery to be long, slow and uncertain.
Unemployment just passed 10 percent and might go even higher, but U.S. stocks are up 60 percent since March. Foreign markets are up even more.
As they did twice previously, policymakers have opened the sluices and poured money all over the economy. In 1999, the cash went into Internet stocks. Five years ago, it went into houses.
This time the cascade is more powerful than ever. Deficit spending is higher. Interest rates are lower. People with their hands on the money are doing what they always do - bidding up assets without much regard for what they're worth.
U.S. stocks aren't as overpriced as they were a decade ago. But that heady whiff you detect is the tingle of effervescence.
"I'm familiar with one institution that just borrowed $400 million - because they could - and then called up and said, 'What should we do with it?' " Mary Miller, director of fixed income for the T. Rowe Price Group, said at the firm's Baltimore symposium Thursday.
Multiply that anecdote a thousand times and you see what's happening. What Bernanke and the Federal Reserve will do next was much on the minds of the symposium's panelists and audience.
"Rates will stay low for longer," said Christopher Alderson, CEO of T. Rowe Price International. "But it's starting to create problems in other parts of the world."
Investors are borrowing cheaply in dollars and sinking the dough not just into American stocks but into places such as India, Russia and Hong Kong, whose stock markets have all doubled.
If stocks keep ascending with no recovery in employment and consumer demand, the end of the world in 2012 might be more than a movie fantasy. You'd see the third investment crash in less than a dozen years. Assets would again become worth less than the money borrowed to buy them. Bankruptcies would ensue.
By many accounts there is tense debate within the Fed. Is it worse to leave interest rates and the money supply at their present lavish levels and risk a new bubble? Or is it worse to start raising rates and risk another recession?
The economic recovery is "solidly under way," Jeffrey Lacker, president of the Richmond Federal Reserve Bank, told the Virginia Legislature this week. As the Fed considers whether to raise rates, he said, "we cannot be paralyzed by patches of lingering weakness."
He's kidding, right? Fifteen million unemployed Americans are a lingering sign of weakness?
On the other hand, unemployment is 10 percent today largely because the Fed kept rates too low too long after the Internet crash. Until the Fed shows it's serious about raising rates, stocks will keep rising. If there's one thing we've learned, it's that we can't fix a burst bubble by blowing another one.