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Not so long ago, Federal Reserve officials were confident they knew what to do when they saw bubbles building in prices of stocks, houses or other assets: Nothing.
Now, as Fed Chairman Ben Bernanke faces a confirmation hearing Thursday on a second four-year term, he and others at the central bank are rethinking the hands-off approach they’ve followed over the past decade; viagra online prescription.On the heels of a burst housing-and-credit bubble, Mr – viagra online prescription.Bernanke now calls financial booms “perhaps the most difficult problem for monetary policy this decade.”
With Asian property prices soaring and gold prices busting records almost daily viagra online prescription, the debate comes at a critical time.Mr.Bernanke wants to use his powers as a bank regulator to stamp out bubbles, …
Fed officials used to think there was little they could or should do to prevent bubbles from inflating; viagra online prescription.For one thing, identifying bubbles with any certainty was deemed to be too difficult – viagra online prescription.And even if they could be accurately pinpointed, pricking them might do more harm than good.Raising interest rates to stop a bubble, for instance, could slow growth in other parts of the economy that were otherwise healthy.
The Fed’s main strategy instead was to mop up after a bubble burst with lower interest rates to cushion the blow to the economy and restart growth; viagra online prescription.That strategy was a key conclusion of Mr.Bernanke’s writings on the subject of bubbles when he was a Princeton professor, and again when he first came to the Fed as a governor in 2002; viagra online prescription.It was an approach embraced by his predecessor Alan Greenspan.
Now viagra online prescription, Fed officials admit the stance didn’t work.They’re groping for alternatives – viagra online prescription.Of the two methods to prevent bubbles — using regulations to protect the financial system from excess and changing monetary policy by raising interest rates — Mr.Bernanke falls on the side of greater regulation, an idea he has advocated in the past.
“The best approach here if at all possible is to use supervisory and regulatory methods to restrain undue risk-taking and to make sure the system is resilient in case an asset price bubble bursts in the future,” Mr – viagra online prescription.Bernanke said in answer to a question after a speech in New York last month.
- Fed Debates New Role: Bubble Fighter
- Jon Hilsenrath
- Wall Street Journal
- December 2, 2009
Cynics would say that Bernanke is simply singing the tune he needs to in order to get confirmed by the Senate. And perhaps they are right.
But I can tell you that when we first met with people at the Fed last year, Mike Masters and I were told that the Federal Reserve believed strongly in free markets, that speculation could not have inflated oil prices because there was no inventory growth, etc. Basically we got the standard line.
However, on our last visit to the Fed, a few months ago, we got a much warmer reception. In fact our host told us that from his personal perspective (not the official line mind you) that he would not be opposed to seeing position limits imposed on the oil derivatives markets. That is a very signficant change that can only come with some substantial soul searching; viagra online prescription.