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Friday, April 17, 2009

Yellen: Minsky Meltdown

Janet Yellen, President of SF Fed, opens the debate on monetary policy, "Should central banks attempt to deflate asset price bubbles before they get big enough to cause big problems?"


Link to the speech


She changed her previous stance on the issue and now is open and willing to entertain the possibility of using monetary policy to deflate bubbles. But as she rightly recognized, it'll be difficult to identify the bubble in the first place and she prefers to use regulatory and supervisory tools to prevent bubble from forming. A nice review piece of the issue. Highly recommend.