Originally Posted by melon

I would argue that the Federal Reserve has been a political, rather than an independent, non-partisan office, ever since, and we should probably evaluate ways to get this monetary institution back on track.

Originally Posted by ntalwar

How can it be a political office when Fed Chairmen serve under both Democratic and Republican administrations?

Originally Posted by melon

Two reasons.

One, the Fed's actions will reflect on the popularity of the President, so the same political and corporate influences that affect the behaviour of Congress are probably quite fiercely lobbying for the Federal Reserve to act in a way that is to their favour.

Two, the Fed can be replaced by the President once his term is up. This is currently the case with Bernanke, as his term is expiring this year. So, again, if you don't play politics the right way, you could be replaced by someone who will.

Originally Posted by melon

To comment about the Federal Reserve, I would happen to agree that it is at fault for these bubbles and bursts, mainly because the Fed has not taken up its historical responsibilities over the last 20 years. The Fed must certainly have known that persistently low interest rates during a time of economic prosperity was a ticket to disaster. These should have been moments that interest rates were slowly raised to more appropriate levels. Even going back to the 1950s, when the economy would heat up too much too quickly, it was not unheard of for the Federal Reserve to literally guide the economy into a mild recession through policy to prevent a deep recession later.

Unfortunately, prudent fiscal policy is now seen as political poison, ever since Bush I lost reelection due to recession. I would argue that the Federal Reserve has been a political, rather than an independent, non-partisan office, ever since, and we should probably evaluate ways to get this monetary institution back on track. One of the U.S.' persistent problems since inception has been figuring out the right way to manage monetary policy, and it appears that, after nearly a century of stability, it might be reverting back to historical pattern.

Originally Posted by financeguy

Good points. I do wonder why this hyping up of bubbles mentality seems to have become so prevalent in the Western world, and not just in the US.

Originally Posted by financeguy

Good points. I do wonder why this hyping up of bubbles mentality seems to have become so prevalent in the Western world, and not just in the US.

Originally Posted by ntalwar

A lot of the non-Western world experienced real estate bubbles as well - Iran, UAE, Vietnam, Singapore, India, China, etc.

Originally Posted by AliEnvy

Maybe when the market crashes nastily again in the next couple of months we'll smarten up and take the foxes out of the henhouse.