What did central bankers have to know and then be empowered to do in order to have avoided the housing bubble and economic fallout? Adam Posen is an External Member of the Monetary Policy Committee for the Bank of England, and a Senior Fellow at the Peterson Institute for International Economics. He spoke at the Cato Institute’s Monetary Conference held in November 2010.
The problem with his analysis is that he doesn’t differentiate between periods of healthy growth vs. periods of inflation (or other government policy) driven growth. That’s why he says not all booms are followed by busts. But it’s fairly easy to spot inflation-driven growth, so it’s also fairly easy to spot bubbles, despite what he thinks.
See my previous post on Monetary Policy, Housing and Other Bubbles and get the free book shown there.
Adam Posen Discusses Asset Bubbles, posted with vodpod