INVESTORS in financial markets across the world are probably heaving a big sigh of relief, on learning that Mr Ben Bernanke has been nominated to head the United States central bank for a second term.
As the global financial crisis enters its third year this month, few have any doubts that he is the man for the job.
He had, after all, kept his nerves about him as he rescued the world's financial system from the brink of collapse last year, cutting interest rates to almost zero and flooding the system with trillions of freshly printed dollars.
Some, like Morgan Stanley Asia's chairman Stephen Roach, have argued against his reappointment. They say that surely his pre-crisis actions had played an equally critical role as those post-crisis.
These actions had, in fact, set the stage for the worst crisis since the Great Depression in the 1930s, Mr Roach had noted.
But such debate detracts from the tough task that lies ahead for Mr Bernanke.
The key issue is what exit strategy he has in taking trillions of dollars out of the system before another credit bubble brews and triggers another financial crisis.
In a report last month, Deutsche Bank analyst Sebastian Becker warned that the excess liquidity now sloshing in the global financial system might be stoking new asset price bubbles.
That is because central banks are flooding the system with enormous amounts of money, hoping that they can encourage banks to lend more to customers on easy credit terms and spur them into spending more.
But as Mr Becker noted, the slowdown had soured consumers' spending appetite, and the weak economy could not absorb the excess money. Instead, this money from the central banks had found its way into the financial markets where it fuelled a stock market boom and rising oil prices.
Therein lies the uneasiness of many market watchers about the impact of Mr Bernanke's reappointment. How will his monetary policies affect Asian economies, even as he goes about his job in rescuing the troubled US economy from its doldrums?
Citigroup strategist Markus Rosgen has noted that it should have taken three or four years, after a recession, for stocks to regain their current valuations. Instead, it has taken only months.
Mr Bernanke's easy money policy has also spawned a real estate boom in Singapore, Hong Kong and South Korea, where banks turn to lending individuals huge sums to finance home purchases.
For history watchers, the current situation - with Mr Bernanke getting nominated for another term as Federal Reserve chairman - bears a striking resemblance to his predecessor Alan Greenspan's own reappointment for a second term in 1992.
Like Mr Bernanke, who has had his hands full fighting a US recession after a mortgage crisis, Mr Greenspan was coping with the aftermath of the collapse of the savings and loans industry which triggered a huge real estate crisis at that time.
As Mr Greenspan later recounted in his memoirs, the problems in 1992 seemed insurmountable - like those faced by Mr Bernanke now. Nothing the Fed did to fix the problem seemed to work.
'The collapse of the real estate boom really shook the banks. Uncertainty about the value of the real estate collateral securing their loans made bankers unsure how much capital they actually had - leaving many of them paralysed and reluctant to lend further,' he wrote.
To combat the resulting economic slowdown, the Fed trimmed interest rates 23 times between July 1989 and July 1992.
Mr Greenspan's bet paid off. It restored US banks back to financial health, as they booked huge profits from lending out the funds borrowed from the Fed at almost zero costs at a huge margin.
But the consequences of his actions turned out to be horrendous for this part of the world, where countries tied their currencies closely to the US dollar.
Like the current asset boom spawned by the trillions poured by central banks into the system, the cost of borrowing in US dollars became so cheap that smart traders on Wall Street made a killing simply by taking out huge loans to make big bets in the regional bourses.
In 1993, stock markets in Singapore, Hong Kong and Kuala Lumpur experienced their biggest bull runs in history, as hot money poured into the region.
Investment bankers told their clients that it was almost a no-brainer: Borrowing in low-interest US dollar and then investing in Thai baht-denominated or Indonesian rupiah-based equities and bonds.
It seemed nothing could go wrong. Regional currencies were pegged so tightly to the US dollar that it was impossible to believe a devaluation could ever take place.
The resulting credit bubble spawned a real estate boom, with cities such as Bangkok and Jakarta turning into huge construction sites as tycoons competed to put up the tallest and flashiest buildings.
But the bubble burst four years later. Thailand devalued the baht as it ran out of reserves to fend off currency speculators. This, in turn, set off a chain of currency devaluations in other countries.
In turn, it triggered the Asian financial crisis which turned tycoons into paupers, as the costs of servicing their US dollar loans ballooned.
So while Mr Bernanke's primary responsibility is to nurse the troubled US economy back to health, he should not forget that his policies have a far-reaching impact beyond US shores.
While he tries to cure the US of deflation, his toxic medicine may stir up asset inflation in a way not seen in the region since the Asian financial crisis over a decade ago.
How will his monetary policies affect Asian economies, even as he goes about his job in rescuing the troubled US economy from its doldrums?
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