As I noted earlier, the key policy question is: If low-cost, incremental policy tightening appears incapable of deflating bubbles, do other options exist that can at least effectively limit the size of bubbles without doing substantial damage in the process? To date, we have not been able to identify such policies, though perhaps we or others may do so in the future.
It is by no means evident to us that we currently have--or will be able to find--a measure of equity premiums or related indicators that convincingly presage an emerging bubble.