The Federal Reserve lowered interest rates to near zero last week. That in itself may have been enough to restore confidence in our economy. But Ben Bernanke took the boldest step ever. He topped this off by buying Treasury securities and creating money like a drunken sailor. He says this needs to be done. Whether or not he's right remains to be seen.

Much of what happens in the foreign currency markets is a matter of perception. Traders for central banks around the world make their decisions to buy or sell a currency based on the actions of the government that the currency represents. For this reason many world governments viewed Ben Bernanke's actions to create such piles of money as a walk on the wild side and decided to sell dollars. How far the Federal Reserve goes in printing money is anyone's guess. We have to keep in mind that, except for a few periodic reports to Congress, there are virtually no checks and balances on the Fed. They were intended to operate as a separate entity apart from any branch of government. Meanwhile, the fate of our economy and to some extent the world economy is in the hands of Ben Bernanke and his merry men.

The war is off budget but we are finding the money somewhere. There are only two possible somewheres -- either we (the federal government) are printing it, or we are borrowing it. Probably some of each, but more borrowing than printing. So if we are borrowing the money, who is lending it to us?

The rest of the world, of course, through their purchase of U.S. treasuries. And who is doing the most buying? The Chinese, of course. They have the largest imbalance of trade with the U.S. Interestingly, so are the Gulf states in the Middle East because of the petro dollars that get recycled into U.S. equities but also into treasuries. How ironic that "our war" is being financed by the indifferent Chinese and the very effected Gulf states, who have a direct interest in us protecting theirs.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.