Whiplash

Manipulation of the money supply is something that is done to conceal dominant economic trends. Currently, the Federal Reserve is attempting to overrule the dominant deflationary trend by generating reams of money. This will fail, and will produce a whiplash effect on prices, a quick reversal from deflationary prices to inflationary prices.

The demand for credit and the price of credit will always be what they should be, when the quantity and the price are reached through mutual agreement between debtor and creditor. When government intervenes in this process and boils the pot of lending and borrowing by offering an artificial 'set' price of credit backed by government guarantees ( like on the upside of the housing bubble ), this will always lead to malinvestment, unwise speculation and runaway leverage, followed by a seizure of the credit system and a collapse in the value of debt-backed assets.