Central bank can’t see asset bubbles coming

Posted by Jack Crooks - Black Swan Capital

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Milton Friedman said, “a central bank can control its exchange rate, it can control its interest rates, and it can control its money supply/inflation. But it can’t control all three at the same time.” Maybe we need to add an addendum: Too much emphasis on price stability will not allow a central bank to see asset bubbles coming at them from a mile away. China is doing a good job with inflation and its exchange rate, thanks to capital controls and its peg. But bubble-iscious it has become.


Financial reform bill could be written on a napkin.  Anyone with a brain knows it.

1. Taxpayer backed institutions should not be allowed to play it both ways — reap rewards of massive risk-taking and have no downside for failure.

2. Derivatives must move from over-the-counter to exchange-traded [and Credit Default Swaps should be banned outright].

….read more HERE