Regarding asset bubbles, regulation should be employed first, Fed chief Bernanke said on Sunday. If that fails, rates can be hiked, he said.
That’s a step in the right direction, as the Fed, until this crisis, refused to respond to asset bubbles.
One Response to “Regulation first, monetary policy second: Bernanke”
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AUTOREFRESH 
The best way to bust a bubble is to warn people that a certain industry has become a bubble, like Clinton and Blair’s joint biotech “blunder” back in 2000. Interest rates impact that whole economy- and the larger problem is the deflationary impacts from de-leveraging in the crucial consumer credit/housing and financial areas. Plainly put, just because Wall St is up to some new version of credit default swap tricks doesn’t mean that some poor guy/gal in Peoria should have to pay more for his/her mortgage. The best outcome is from surgically popping each bubble as it emerges. That creates a slightly less bump path to deflation. After all, if deflation were to really take hold and if interest rates were to get so high that people can’t service their debts, then its game over.