Losses = Lessons Learned?

In Oct. I was concerned that a rate cut could lead to an erosion in Fed credibility. The way I saw it the Fed had to options: hold firm and signal more easing or cut and signal that the easing cycle was over. I prefered the former, the Fed chose the later.

Now, it seems that their decision may be coming back to haunt them. As many have pointed out the situation has detoriated and there is strong reason to ease again in December. I tend to support antoher quarter point cut at this point.

However, what does it say about Fed credibility and foresight that just weeks ago they signaled that the cycle was ending and now it may be begining anew?

On the positive side, though, massive losses by the banks and brokers have loosened some of the concern about moral hazard. With record right downs it is hard to argue that the financial markets have not been forced to account for the excess of the past five years. This is good news for those hoping for more cuts.