The Federal Reserve released on Thursday the latest details of its burgeoning balance sheet. In short, the assets on the Fed's books now amount to $2.2 trillion. That's more than double where it was a little over a year ago (when it stood at a mere $900 billion) — before the central bank bought tons of Treasury debt and mortgage-backed securities from the nation's banks in the midst of last year's credit crisis, putting government cash in the hands of those banks.

Now, when the Fed's balance sheet is big and banks have all that extra money to lend, the usual impact is that the increased number of dollars in the economy are competing for the same amount of merchandise. Prices go up; in other words, we have inflation.

You may have noticed, however, that it's not working that way. For the most part, in fact, prices are actually heading down. How can this be? More

Mortgage rates are below 5% again. But they might not stay that way for long — even though the Federal Reserve reaffirmed its ridiculously low, 0% to 0.25% target for the federal funds rate.

Yes, it's great for borrowers that the Fed kept its target rate so low. But the text you should really care about is this little tidbit from the Federal Open Market Committee's policy statement:

"To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010."

More