All bubbles are caused and ended by monetary policy.
Go look at the last four cycles.
Each one was ended by the Fed raising short-term rates above long rates.
Each one was caused by the Fed manipulating short rates, keeping them too low for too long.
The Fed should get out of the business of managing short-term interest rates.
* * * * * J B K * * * * *
San Francisco
Monetary policy is not an effective tool for pricking asset bubbles, but central banks without authority to supervise banks may have no alternative, Chicago Federal Reserve President Charles Evans said Tuesday.
Evans made the comments as reform proposals move forward in Washington to strip the Fed -- the U.S. central bank -- of supervisory authority over small banks. The reforms would add to the Fed's role in supervising large financial institutions.
Regulatory reforms designed to prevent a repeat of the financial crisis, which was fueled by asset bubbles, should give central banks a supervisory and regulatory role so they have additional tools to promote financial stability, he said, according to the prepared text of a speech in Hong Kong.
A central bank, because it is the lender of last resort, should have a role in promoting financial stability, he said.
