What is it with those Brits?

It's not clear how this story could have escaped our attention in recent days, but on the eve of Ben Bernanke's first monetary policy statement today, another writer from across the pond has taken issue with the recent stewardship of the world's reserve currency.

He has quoted Paul Volcker, warned of impending doom, and generally seems intent on trying to spoil the party that is the robust American economy in this year 2006.

What is it with those Brits?

At least this time, there is a name affixed to the cautionary words - one Ambrose Evans-Pritchard, who also penned The Secret Life of Bill Clinton, offers his critique of the U.S. Federal Reserve. Somehow it is not surprising to get to the bottom of his bio and read that he used to write for The Economist.

As Ben Bernanke knows all too well, monetary policy is like pulling a brick across a rough wooden table with a piece of elastic. Tug, tug, tug: nothing happens. Tug a little harder: it leaps off the surface and knocks your teeth out.

A garrulous professor, he could scarcely have taken charge of the US Federal Reserve at a more hazardous moment, just as the credit cycle nears it peak.

The departing Fed chairman Alan Greenspan has done the easy work, lifting US interest rates to 4.5pc in 14 brisk steps from the aberrantly low - perhaps fatally low - level of 1pc in June 2004. This may be near the "neutral" level, or not.

A mistake now could put millions out of work, or worse, and since it takes a year or more (the Swiss National Bank says three years) before the full effects of monetary policy are felt, Mr Bernanke will not find out until it is far too late.

He will have to trust his instincts as he picks up a chalice brimming with the nastiest of toxins: a current account deficit of 7pc of GDP, covered for now by fickle flows of capital from the Chinese central bank and petro-dollar sheikhdoms; a negative flow of global investments earnings for the first time in modern memory; a dollar hanging by a political thread; and hair-raising levels of debt.

"Bernanke is not inheriting the best of situations," said Paul Volcker, the grizzly voice of orthodoxy and another ex-Fed chief.

While the image of pulling a brick across a rough wooden table with a piece of elastic does a fine job of conveying the sort of randomness and mechanical dynamics that can quickly cause bodily harm, somehow, the scale and the impact just don't seem to be of the proper magnitude.

Knocking out the teeth of one man pulling on a brick?

When energy is expended here to come up with an analogy that can help communicate the potential dangers that lay in wait for policymakers at the world's most powerful central bank, thoughts naturally gravitate toward large, indestructible ocean liners speeding across the North Atlantic.

But then hope springs forth from Ambrose's pen when the one percent interest rates of 2003-2004, which led to the commencement of baby step interest rate hikes which continue today, are referred to as "perhaps fatally low".

That characterization seems to more than makes up for any real or perceived deficiencies with the brick and table story, as it becomes clear that Messr Evans-Pritchard was perhaps, just getting warmed up, early on.

When it comes to America's housing boom, which many are now sure will result in the same sort of "soft landing" currently being experienced in both Australia and the U.K., both the new Fed Chief and sidekick Donald Kohn seem indifferent to the shrill cries coming from local newspapers and data reporting agencies, as they march steadily toward interest rate normalization.

Mr Bernanke's steely line is all the braver given the disquieting data coming from the East and West Coasts. January home sales were down 14pc year-on-year in Massachusetts, and down 24pc in California. Prices usually follow.

The levels of US household debt are vertiginous, rising 8.6pc in 2000 from already dizzy heights, then again 8.6pc in 2001, 9.7pc in 2002, 11.4pc in 2003, 11.1pc in 2004 and 11.7pc in 2005.

The Fed itself has warned that millions of punters are "in over their heads" with 100pc mortgages and zero up-front interest costs. The personal savings rate has turned negative for the first time since the early 1930s.

As fitting testimony to the bubble, estate agents, surveyors, and the army of workers linked to property made up 55pc of the 2m jobs created by the US economy from 2000 to 2005, according to Moody's.

The rolls of the National Association of Realtors have grown from 767,000 to 1.2m in five years.

The Americans are now drawing down 6pc of GDP from the equity in their houses each year, much of it to pay bills or splash out on a spanking new V-6 Chevrolet Equinox.

Goldman Sachs estimates that 68pc of this home equity withdrawal is spent outright on consumption. It warned that the drag on growth could reach 1.5pc of GDP by next year if property stalls.

It is portrait of a nation that is living further beyond its means than any advanced society has ever dared before.

By Britain's world-beating standards, the 13pc rise in US house prices last year (35pc in Arizona, 27pc in Florida) seems paltry stuff. But the two markets are chalk and cheese. America has abundant land, easy planning laws, and now a record five-month inventory of unsold homes in sprouting suburbs across the country.

It is hard to believe that Mr Greenspan would have stood by impassively as this - the biggest of all his serial bubbles - began to pop.

For 17 years, "Easy Al" was always there with sacks of liquidity, ready to rescue one wave of speculators after another: the Latin Tequila crisis in the mid 1990s, the Asian meltdown, the Russian default and the tech bubble.

He recoiled from raising rates to halt excesses, insisting that it was not for central banks to meddle in asset markets.

Yet he stepped in time and again to cut rates when values plunged, putting a floor under investment losses. Traders even have a nickname for this variant of moral hazard: the "Greenspan Put".

The Bernanke Fed seems made of sterner stuff and is clearly of the view that there is no free lunch in economics.

Those who expected Mr Bernanke to prove an "easy money" bet may be in for a shock.

Dubbed "Helicopter Ben" by his legions of critics, he put his foot in it in a speech as a junior Fed governor in 2003, exuberantly rehashing the old quip (Milton Friedman's) about dropping bank notes from helicopters to stave off deflation.

"The US government has a technology called a printing press that allows it to produce as many US dollars as it wishes at essentially no cost," he said. How he must rue those words today.

It was the Princeton professor in him speaking, not the banker, but the damage was done. It would be human nature if he now proves as tough as nails.

Wow! There's a lot going on there, and it didn't seem right to just pick bits and pieces - better to just let it flow. Splashing out in Chevrolet Equinoxes, consumption fueled by home equity withdrawal, and the most profligate spenders in history - all points that are hard to argue against.

However, the suggestion that Ben Bernanke would not act just like Alan Greenspan in "mopping up" after a bursting asset bubble just doesn't seem to ring true.

There may be a month or two where the new Fed Chief succeeds in forever vanquishing the "Helicopter Ben" label amid cries from elected official to relieve the great pain being inflicted on debtors across the land, but to think that Easy Al's great successes could be so quickly forgotten would be wholly inconsistent with Mr. Bernanke's pledge to Congress a few months back to continue just as Easy Al would have done.

That pledge, of course, translates to the course of action where, when faced with a bursting asset bubble, to blow an even bigger one.