No wonder the yield on the benchmark 10-year Treasury note finished at 2.65 percent last Friday, after several flare-ups in the 2.70-2.75 percent range over the last month-and-a-half.
The Fed's printing presses have also been good for equity markets: The S&P 500 gained 4 percent since late January.
(Read more: Yellen sees better economy, less money printing)
Foreign bond sales and weak economy
This latest surge in Fed's monetary creation comes after three months of a significant slowdown in the rate of expansion of its record-high $3.9 trillion balance sheet. Indeed, monthly increases in the monetary base between November and January were brought down from $95 billion to $11 billion.
The question is: What caused this sharp policy reversal since the end of January? There are two explanations.
The first is the yet unconfirmed story that the Fed was picking up Treasury securities that were allegedly dumped by the Russians and the Chinese. The official statistics are not out, but these are the guesses because both governments have been net sellers of American debt instruments during the fourth quarter of last year.
The other explanation has to do with the lingering weakness of the U.S. economy.
In spite of a strong acceleration in the second half of last year to an annual growth rate of 2.3 percent, from a puny 1.5 percent in the first six months, a big slack in labor and product markets is leaving the economy well below its noninflationary growth potential of about 3 percent.
The labor market data for February show little change in the number of people out of work and in the unemployment rate. Adding the involuntary part-time workers and those who dropped out of the labor force (because they could not find a job) to the recorded jobless numbers brings the actual unemployment rate to more than 13 percent, double the officially reported rate of 6.7 percent.