If I am right in this, the question immediately arises of whether monetary policy should have as one of its objectives to limit the accumulation of such imbalances or, more simply put, to prevent the emergence of financial excesses. This has become a hotly debated subject of monetary economics in recent years, and the end of the debate is not in sight.
The alternative would be deleveraging on large scale to gain market’s confidence and meet prudential standards, which will be highly detrimental to macroeconomy. Thus, there is a clear dilemma in the short term which will have to be addressed from a long term perspective.