How Financial Bubbles Occur

I see where our past experiences on financial bubbles are going to waste.

In my studies as a market analyst and businessman, I have seen how bubbles originate, and then cause damage. I would like to make suggestions.

Bubbles are not stopped by Federal Reserve action on interest rates, as is usually suggested by pundits. That is because politicians always take over, and often influence any dampening of interest rates by the Fed.

Not in a manner that can have an effect on a bubble. It would, for example, have had done absolutely nothing with the internet bubble. Or even the mortgage bubble because interest rate adjustments then would have been applied too late. The Fed’s miscues were too early to have been recognized.

Interest rates today are too low to start with, so the Fed inflates with bond purchases;

Action or inaction by the Securities and Exchange Commission would have been effective. Just sitting on obviously useless and dangerous financings, instead of open-handed approvals of questionable underwritings created the internet bubble.

By merely slowing down the underwriting of questionable deals, the SEC would have dampened many such past debacles.

So the Fed had little to do with the bubble solution all the time. In fact, it has aided and abetted the problem. ( See the Earl J. Weinreb NewsHole® comments.)