"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

- Ludwig von Mises - Topics: Debt, Monetary Policy.

This is the predicament the Fed finds itself in. If it keeps the credit expansion artificially going (by keeping interest rates artificially low so debts can still be serviced) it can "kick the can" a little further down the road. If it stops the expansion (by letting interest rates moderate toward a more meaningful natural rate) then the credit bubble implodes.

But there is a finite length to the road for said can to be kicked. The longer we artificially keep the credit expansion going, the worse the bust will be. That is the paradox. Dammed if they do, damned if they don't. Only the timing and magnitude differ.

John

Edit:

"Contrary to most experts — including Bernanke — the more aggressive the Fed’s policies are, the worse the economy is going to be. If all that is required to revive the economy is pushing more money, then all third-world economies would be very wealthy by now"

- Frank Shostak - Topics: Central Bank, Inflation, Monetary Policy.