This aspect of things must be neutered or at least
countered.
The second lesson is the important role that central banks and other
financial authorities play in the precipitation of financial crises -
or in their prolongation. Financial bubbles and asset price inflation
are the result of euphoric and irrational exuberance - said the
Chairman of the Federal Reserve Bank of the United States, the
legendary Mr. Greenspun and who can dispute this? But the question that
was delicately side-stepped was: WHO is responsible for financial
bubbles?
Expansive monetary policies, well timed signals in the interest rates
markets, liquidity injections, currency interventions, international
salvage operations - are all co-ordinated by central banks and by other
central or international institutions. Official INACTION is as
conducive to the inflation of financial bubbles as is official ACTION.
By refusing to restructure the banking system, to introduce appropriate
bankruptcy procedures, corporate transparency and good corporate
governance, by engaging in protectionism and isolationism, by avoiding
the implementation of anti competition legislation - many countries
have fostered the vacuum within which financial crises breed.
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