René Stulz on Asset Bubbles
| Peter Klein |
From the HBR series “Finance: The Way Forward”:
At the same time, however, it is also critical to create conditions that make it more difficult for bubbles to emerge. This means fundamental changes in public policy. The most important change is to do everything possible to make sure that no institution is “too-big-to-fail.” We also have to do away with the Bernanke put. It is not possible for the public sector to guarantee investors against losses without creating more and more instability.
I’d add that policymakers should avoid creating bubbles in the first place, but that’s a subject for another day.