Doug, simply put, the Fed is now indeed 'trapped' by the bubble. my guess is that even after Y2K, they will not do anything that might pop it. meaning, the sea of liquidity will NOT be withdrawn, unless something occurs to force the Fed's hand, like a collapsing dollar, bond market or both.
i expect them to feed the beast as long as that is possible and hope for a miracle. no miracle will be forthcoming however. imo the end will be a hard landing, the 'reason' for which can not be identified as of yet. since the Fed is not prepared to stop the bubble from inflating, they will drive it to the stage where the whole thing will likely end in a classic systemic collapse...i recommend reading Ludwig von Mises's thoughts on credit expansion driven bubbles. these are the possibilities: either credit is reduced (not an option with the Greenspan Fed), causing the bubble to burst, or it isn't, in which case the whole system eventually collapses.
third possibility: we are indeed in a 'new era'.
regards,
hb
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