The Fed's Infinite Do-Loop

In 2008, the Federal Reserve sharply increased it's bond buying in the face of severe liquidity problems and a major recession. What was supposed to be a temporary, radical monetary policy has now become a permanent one. 

Ben Bernanke recently said that the reason they would hold off on reducing bond buying was that “the Fed has some concern that the rapid tightening in financial conditions in recent months could have the effect of slowing growth…a concern that would be exacerbated if conditions tighten further.”

I think I've identified what computer programmers used to call an “infinite do-loop”.  

Step 1: The Fed announces that they are considering reducing bond buying.

Step 2: The markets respond by driving interest rates up

Step 3: The Fed cites this“tightening in financial conditions” as a reason to hold off their bond buying

Step 4: The Fed increases its purchase of Treasuries for its balance sheet,

Step 5: Go to Step 1