Why Asset Bubbles Involve So Much More Than Just Rising Prices

Read more on this subject: Stock Market
News Story Source: https://www.zerohedge.com by Frank Shostak
Eric Rosengren, president of the Federal Reserve Bank of Boston, told the Financial Times that the Fed lacked sufficient tools to "stop firms and households" from taking on "excessive leverage" and called for a "rethink" on "financial stability" issues in the US.

If you want to follow a monetary policy…that applies low interest rates for a long time, you want robust financial supervisory authority in order to be able to restrict the amount of excessive risk taking occurring at the same time," he said. Otherwise "you're much more likely to get into a situation where the interest rates can be low for long but be counterproductive.

According to the Financial Times, one of the fears among some Fed officials is that the US central bank could be forced to raise interest rates earlier than it would like if financial sector risks are not kept under control and dangerous asset bubbles emerge.

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