Fed Not at Fault for Housing Bubble? Really?    • Commentary
But he doesn’t note two critical factors.  1. Rapidly
accelerating asset prices were signaling economic overheating
even though underlying inflation was stable both in the U.S. and
the U.K. Consumer price inflation was kept stable because of
goods-price deflation driven by Chinese exports. The Fed and the
BOE were blind to these signals.  2. Under Alan Greenspan, the
Fed had clearly and consistently signaled that the central bank
would react to any weakness in asset prices by cutting rates
aggressively. This became known as the Greenspan, and later the
Bernanke, put. The Fed would always provide a safety net to
prevent asset-price deflation so that even if there were
relative changes to asset prices, overall wealth would be
inflated. So, for instance, monetary policy after the bursting
of the Nasdaq bubble didn’t return the Nasdaq to its previous
highs, but it did boost the equity market more generally and
house prices specifically.  The Fed’