Saturday's Wall Street Journal revealed that the Federal Reserve has been conducting numerous exercises to explore would it could to arrest the growth of asset bubbles as well as the risks inherent in doing such a thing (as opposed to nothing about it, which has been the standard operating procedure for some time).
That the Fed is thinking anew about how it should react to such a financial crisis is welcome news, but it's wrong to think of it as a new development. After the 1929 stock market crash and the ensuing Great Depression, both of which were made significantly worse by the Fed's sins of omission--and commission--before and during the crisis, the Fed realized it needed to assign itself this task.Read more
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