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On the related subject of bubbles, Jon Hilsenrath wrote a very fine column in Wednesday's Wall Street Journal titled "Wanted: A New Policy for Bubbles," which everyone should read. (Click here; subscription required.) He makes many points that are near and dear to my heart regarding the pivotal role of the Greenspan Fed in bringing us to this sorry juncture. Hilsenrath's last sentence expresses my view on the present crisis succinctly and precisely:
"If the government is going to intervene aggressively when bubbles burst, as it's doing now, then maybe policymakers should do some new thinking about how to prevent bubbles in the first place."
Amen. If the powers that be would just try to effect that strategy, it would be the silver lining to the housing bubble.
Defenestrate 'em out the discount window
A good start to preventing future bubbles would be to abolish the Fed. Or, at a minimum, to clarify its mandate. The Fed's No. 1 goal should be price stability, and it should be forced to stop its practice of interest-rate targeting. That is the flawed policy that got us to here.But until the economy gets bad enough to force such a change, anyone with an ounce of common sense and decency will be forced to endure being routinely nauseated, at the very least.
At the time of publication, Bill Fleckenstein did not own or control shares of any of the equities mentioned in this column.
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