The Federal Reserve last week announced that it expected to keep interest rates near zero well into 2014 in an attempt to stabilize markets and help the American economy recover. It hasn’t so far but Chairman Ben Bernanke seems to believe that there just isn’t enough cheap money in circulation yet.

The central bank has kept short-term rates below .25 percent for over three years and purchased some $2.3 trillion in long-term securities during two rounds of “quantitative easing” since the financial panic began in December 2008.

When the Fed initiated its second round of quantitative easing, effectively printing $600 billion, Chairman Bernanke took to the pages of The Washington Post to explain how the “easier financial conditions” he created would stir economic growth.

Lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

That was twelve months ago. Homeowners are still struggling. Investment has stalled, in part because of the regulatory uncertainty that the Obama Administration has created. Stock prices do move up every time the Fed injects more money into the market but the effects aren’t felt in the real economy because it’s a game of smoke and mirrors and everyone knows it.

You cannot create money out of thin air and expect it to solve a crisis that was made by too much cheap money in the first place.

In his defense, Bernanke admitted that the Federal Reserve cannot save the economy on its own. But it can make prolong the slump by trying to stave off the contraction that must happen if the massive misallocations of credit and investment that were built up in the years preceding the downturn are to be filtered out of the system.