Last year I wandered down the street to an open house for sale. Even though I announced myself as a looky-loo, the agent welcomed me. We sat around talking and eating cookies for an hour; no prospects showed up.

It was a nice day today and I decided to walk to another open house thinking I’d again look around and chat with the agent. Hardly – the place was mobbed! It looks great in this picture but the reality is it’s stuck way up on a hill with a steep driveway and no garage. It’s 80 years old and although it’s been fixed up cosmetically it’s nothing to write home about; not in my book anyway. Nevertheless, I’m betting they’ll have multiple offers before this first day on the market is over.

This is the San Francisco Peninsula which is by no means representative of the whole country but I hear that Las Vegas has turned around too, as have tony places in New York. Why? Although I can’t prove it, I believe a good part the gusher of money that the Fed has been printing is now making its way into housing. The stock market has stalled, the bond market is in retreat, gold has plummeted, and that pretty much leaves housing.

So although the basic premise of monetary stimulus is plausible, it just doesn’t work. The new money seems to go careening around the economy in search of the Next Big Thing. Bubbles form and collapse, malinvestments are revealed and the cycle starts anew. What’s different this time is that it’s been such a short time since the collapse of the previous housing bubble to what looks like the start of another.

If these wasteful cycles of boom and bust are to end, the Fed must cease its stimulus programs. But it can’t. When the Fed dropped just a hint last week that it might start “tapering” off its bond-buying (money-printing) program, the bond market panicked. Why should we care about the bond market? For one thing, the average maturity of the federal debt is just a couple of years. Maturing debt must be rolled over into new debt, and if the new debt carries higher interest rate, the total annual interest payment could quickly swell from a “mere” $345 billion for the current fiscal year toward a trillion dollars per year, swamping any efforts to contain spending, like the $80 billion sequester that just took effect. We could end up needing a bailout from China.

The Fed will very likely continue or even accelerate its bond buying, depending on who occupies Bernanke’s seat come January. We should expect continuing cycles of bubbles and busts and the real possibility of some very nasty fiscal consequences.