>But that's just one fo the tools, right? The other is the ability to regulate
>how much money is created through the addition/substraction of reserves,
>through open market operations. And in out-of-control bubbles, when people
>don't really care how much interest they are paying, that one is more
>important, isn't it?
>
>Also, I am not sure that the ability to set interest rates in unaffected by an
>alternative, unregulated banking system.
The monetarists pretty well lost the battle; there aren't many folks who don't believe interest rates to be the primary mechanism of monetary policy.
It may take time for higher rates to burst a bubble, but it will happen. I'd guess that the carnage on the NASDAQ is a product of Fed tightening - it just took some time.
Doug