We have some real ideological differences, but Andy Kessler, who wrote this op-ed in today's Journal, makes some good points about why the stock-market rally may be mostly smoke and mirrors. Most interesting is this semi-conspiratorial idea about how the rally looks like it was conceived to help re-capitalize banks:

On March 18, the Federal Reserve announced it would purchase up to $300 billion of long-term bonds as well as $750 billion of mortgage-backed securities. Of all the Fed's moves, this "quantitative easing" gets money into the economy the fastest -- basically by cranking the handle of the printing press and flooding the market with dollars (in reality, with additional bank credit). Since these dollars are not going into home building, coal-fired electric plants or auto factories, they end up in the stock market.

A rising market means that banks are able to raise much-needed equity from private money funds instead of from the feds. And last Thursday, accompanying this flood of new money, came the reassuring results of the bank stress tests.

The next day Morgan Stanley raised $4 billion by selling stock at $24 in an oversubscribed deal. Wells Fargo also raised $8.6 billion that day by selling stock at $22 a share, up from $8 two months ago. And Bank of America registered 1.25 billion shares to sell this week. Citi is next. It's almost as if someone engineered a stock-market rally to entice private investors to fund the banks rather than taxpayers.

It's a stretch to think Bernanke boosted the stock market to help banks raise capital--hard to believe he could have counted on that happening even if that was the hope, and even Kessler only says it half-seriously. But it's reasonable to argue that that's been one of the effects of the Fed's aggressive anti-deflationary policies.

--Noam Scheiber