If we did our job poorly and tolerated significant deviations from price stability and fluctuations in aggregate income and output, we would only add to the difficulties workers and businesses face in discerning the correct signals from evolving relative prices and in making the resultant necessary and beneficial adjustments in resource allocation.
In sum, financiers were taking on more risks than they would like to, and in many respects they did not understand or were unaware that they were doing so. This reasoning suggests that policy actions to treat underlying causes should address the causes of risk mispricing and should attempt to reduce uncertainty.