Winter's chill is giving way to the rebirth of spring. But it's not just the warmer weather that has investors in a celebratory mood. Stock prices have been blooming in a low-volatility rise that seems perfectly, well, natural.

And investors are enamored with the idea of economic deliverance at the hands of Federal Reserve Chairman Ben Bernanke, via a new round of stimulus involving hundreds of billions more in cheap dollars. He will keep stocks rising. He will solve our intractable problems. It's a cult of personality. And it's a mistake.

It won't be the economic salvation investors expect; Bernanke's about to unleash a hellish inflation that will burn the economy for years. It'll be a slow burn that eats away at the average American's already-diminished living standards through pricier food, fuel and other necessities at a time of stagnant wages, depressed wealth and diminished savings.

Perhaps the biggest pain point: While oil prices rise on talk of Mideast conflict, action by Bernanke and the Fed could push oil prices past $200 a barrel, according to analysts from Bank of America Merrill Lynch. And that would translate to more than $7 a gallon at the pump, according to estimates by CIBC World Markets.

It's time to stop the stimulus

I'm not a lone prophet on this. A growing chorus of Wall Street economists and academics is questioning the market's new monetary policy religion that economic fundamentals don't matter anymore, because liquidity -- cheap money -- trumps all.

Indeed, a few weeks ago Hervé Hannoun, deputy general manager at the Bank for International Settlements (which is the central bankers' central bank), told a conference in South Korea that we're nearing the limits of what monetary policy can accomplish without undoing the hard-won victory over inflation in the early 1980s. He warned against the "illusion of unlimited intervention" that is "peddled daily by the pundits in the global financial markets" who talk of monetary firewalls and bailout-fund bazookas.

Image: Anthony Mirhaydari

Anthony Mirhaydari

There is an increasingly dangerous belief that central banks are all-powerful overlords that can always counteract the fallout of financial crises and can forever act as a lender of last resort for both banks and countries. They can't.

As the great Milton Friedman taught us, persistent inflation is always a monetary phenomenon. Back when the money supply was held constant under the gold standard, the market sorted out higher commodity prices caused by supply disruptions via recessions and demand destruction. Now, price increases caused by the potential for oil supply disruptions out of Iran and elsewhere are magnified by the Fed's maltreatment of the dollar. Other things being equal, a weaker currency will increase the price of real assets -- including crude.

We shouldn't confuse symptoms (higher oil prices and incipient inflation) with causes (overzealous monetary policy). Messianic mullahs with their hands on the oil spigots are a problem. But they're not the root cause.

Personal consumption expenditures

That's because unlike back in the depths of the recession in late 2008, when the Fed started getting creative by slashing real interest rates to zero, creating new mechanisms to support areas of the credit market and engaging in direct purchases of long-term bonds, inflationary pressures are acute and growing.

Gas prices are moving over $4 a gallon as crude oil returns to last year's highs. Even more alarming, inflation, as measured by the Fed's preferred gauge, is hovering near 2.5% -- well above its newly established 2% target as shown in the chart above.

The time for Fed "creativity" is over.

Cheap money won't save us forever

It's like this: The stock market's 25% rebound from the October lows happened because major central banks have opened the floodgates, unleashing a torrent of cheap money -- bringing the total monetary injections since 2007 to nearly $7 trillion, enough to give every man, women and child on Earth more than $1,000.

These efforts were fruitful in the beginning, when the global economy was on its back, factories were quiet and crude oil was trading at around $35 a barrel. Things are different now. We're paying for our sinful manipulation of the money supply. More cheap money will just make it worse. (For more on the "right way" to get out, review "The world's 8 trillion debt hole.")

The latest round of stimulus started back in November, when the Fed made it easier for foreign banks to borrow dollars. It continued in December, when the European Central Bank offered its banks unlimited three-year loans, an offer that was repeated this week.

Now, attention is turning to the Fed and what it might do at its March and April meetings. Will it unleash a third round of quantitative easing, or "QE3," which amounts to printing money and pumping it into the financial system?

It's easy to think all our structural problems can be solved with more money. The housing overhang. The West's $8 trillion in excess debt. Dysfunctional policymaking. The national deficit. Indeed, despite weakening economic fundamentals, a disappointing fourth-quarter earnings season, Greece's debt woes and likely eurozone exit, and a looming U.S. fiscal showdown later this year over the debt ceiling and the Bush tax cuts, the Dow Jones Industrial Average ($INDU) continues to flirt with levels last seen in 2008 as if nothing were amiss.

Continued on the next page. Stocks and funds mentioned include: ProShares Ultra Silver (AGQ, news), iShares Silver Trust (SLV), Century Aluminum (CENX, news) and US Airways Group (LCC, news).