How to Save American Finance from Itself

What about the possibility of cutting off the bubbles before they become dangerously large? It has often been proposed that the Fed should limit asset-price inflation in much the same way that it is committed to limiting goods-price inflation. In that view, the Fed should have choked off both the dot-com and house-price bubbles before they became large enough to do much damage. The usual counter-argument is that it is difficult to distinguish an asset bubble from a rise in price that is justified by “fundamentals.”

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