If a person lives long enough, he can watch everyone forget everything they learned. Everyone includes Federal Reserve Chairmen, economists, Bank of America "strategists," and even Bloomberg.com.

Federal Reserve Chairman Ben Bernanke thinks he can hold down US long-term interest rates by purchasing mortgage bonds and US Treasuries. Sixty years ago the Federal Reserve understood that this was an impossible feat. After an acrimonious public dispute with the US Treasury, in 1951 the Federal Reserve forced an "Accord" on the government that eliminated the Fed's obligation to monetize Treasury debt in order to hold down long term interest rates.

President Truman and Treasury Secretary John Snyder wanted to protect World War II bond purchasers by preventing any rise in interest rates, which would mean a decline in the price of the bonds.

The Fed understood that monetizing the debt to hold down interest rates meant loss of control over the money supply. The policy of suppressing interest rates could only work until the financial markets anticipated rising inflation and bid down the bond prices. If the Fed responded by buying more Treasuries, the money supply and inflation would rise faster.

Since Fed Chairman Bernanke announced his plan to purchase $1 trillion in mortgage and Treasury bonds in order to help the housing market with low interest rates, interest rates have risen. When will the Fed remember that printing money does not lower long-term interest rates?

According to Bloomberg (June 3), Bank of America strategists are recommending that investors buy Fannie Mae bonds because the rise in interest rates means the Fed will ramp up its purchases in order to prevent rising interest rates from adversely impacting the struggling housing market. When will financial gurus remember that printing money does not lower interest rates?