It's amazing how the Federal Reserve says one thing and actually does another.

The Federal Reserve, created in 1913, is supposed to be an inflation-hawk, protecting the value of the dollar. Well, forget its original mandate, which deserves a big 'F.' Under former Fed Chairman Greenspan alone, the dollar shed more than 45% of its value from 1987 until 2005. The Fed talks a tough game on inflation, when in reality, it usually prints an exorbitant amount of credit, which fuels inflation. The only period when the Fed did not print dollars was to arrest bulging inflation in the 1980-1982 period under Volcker. Otherwise, you can always count on the Fed to print, print and print even more.

With the mortgage-backed market now obviously coming undone and nobody really knowing just how bad a mess this will turn out to be in the end, I'm guessing the Fed is inching closer to lowering short-term lending rates. This really is a crisis. The sub-prime market has been knocked-out of business while the Alt-A market is also under stress. The good news is that hedge funds are coming to the rescue to some distressed lenders and employment growth across the country remains benign. So far, the fallout seems rather well contained. But I've got to believe that with the sub-prime market now in distress and many other higher quality loans under stress, the housing market is not going to recover quickly. After all, about 15-20% of the mortgage market is now in a bear market, unable to participate in the housing refinancing business.

Over the next three months, we'll have a much clearer picture of the economy and housing.

I'm sure we're all relieved that stocks have recovered over the last several sessions, especially following yesterday's FOMC shift to what appears to be a "neutral" interest rate bias. Don't go on any buying spree just yet; we're going to see more selling before first quarter earnings hit the market over the next three weeks.