Federal Reserve’s role examined

America’s Federal Reserve Chaiman is probably regarded as the world’s most powerful man, people care passionately about what he says. The Fed is recognizing this is a crisis and is going to do everything it can to stop this from bringing down the financial system. Can the Fed do enough at this stage? And, has it actually transmitted a sense of panic by making this message so clear? (Clearly there was panic in some markets. Why would a market react so strongly especially when the Fed is taking action to help out?) There’s a whole list of things which are linked, which you could say about global finance in general. The Fed’s cuts weaken the dollar which makes it tough for Americans to buy Asian goods, which is bad for Asian stocks. The fact that Bear Stearns is in that much trouble is bad news for other stock market agencies. (What does this do for the reputation of someone like the Fed Chair?) His reputation isn’t good. Credibility is very important for a Fed Chairman and he lacks a lot at the moment. Greenspan was really regarded as a colossus when he left office two years ago and his reputation has taken more of a hit because many people say he’s more to blame. (What happens if there is a recession here in the US?) Internationally, the big emerging markets, like China, India and Brazil, will also suffer. (How would you categorize the world is looking at the US in terms of financial management?) I think it’s hard to see how global opinion could be much more negative than it is. You just need to look at the value of the US dollar to see this kind of fall in opinion. One big cause for hope is that it’s such an extreme fall that it looks overdone.