
Fed Governor Charles Plosser said:Credibility is a kind of currency. Once the Fed has spent it, people lose faith
More: http://www.moneynews.com/Headline/Fed-Plosser-chance-Inflation/2011/10/20/id/415137
That article pretty much lays out the truth - the Fed is in the business of managing (and manipulating) expectations and confidence. It's a confidence game.
