Paul Volcker gave a speech yesterday. There was no mention of it in the New York Times and the only place the topic was mentioned in the Wall Street Journal was in the lead editorial. Paul Volcker thinks that we are in a "Dollar Crisis." We should all pay attention.
The 'take-aways' from the speech seem to be:
1. The dollar crisis will be with us for a while;
2. The Fed can't ignore the decline in the value of the dollar and just focus on a recession;
3. The Fed can't give in to efforts to solve the housing situation (these efforts are political);
4. The Fed can't sacrifice the 'integrity of the currency" by holding suspect mortgage-backed securities;
5. The Fed can't give away the shop by bailing out investment banks, hedge funds or private equity.
The bottom line is that the Federal Reserve is a central bank and "should be" independent of the political process. That is, the Fed needs to be the Fed!