Fed Credibility

Henry Kaufman is significantly more critical than I am.

This post from Naked Capitalism is well worth the read.

In some sense Kaufman is saying that the market cannot be treated as an equal partner with the Fed when the market is in no position to bear the level of accountability the Fed must shoulder. The Fed can't make the market clean up its own messes because the market is not capable of doing so without damaging Main Street, the constituency the Fed is supposed to protect first.

Though it disturbs my liberaltarian sentiments, I find it difficult to disagree.