If one takes the narrow definition of a bubble used by researchers then – in order to identify a bubble – policymakers need to prove that, given the information available at the time, investors behaved irrationally. This is an impossible task, even ex-post.
Moreover, as Clapham (1945) observed, higher interest rates during a period of crisis would draw in gold from abroad, easing strains on the Bank. 2  BIS Review 58/2008  systems, the combination of effective banking supervision and deposit insurance has substantially reduced the threat of retail deposit runs.