Inflation Targeting Won't Fix The Fed Says Policy Analyst Rich Danker | Markets | Minyanville.com: "Even if the Fed had used a traditional inflation-targeting framework like the ECB, it is far from clear that it would have been able to avoid the road Bernanke took it down. Inflation by any measure was fairly modest and not indicative of the price surge concentrated in residential real estate from 2003-2007. That the bubble happened in the low-inflation environment of the so-called Great Moderation tells us two things: inflation is an inadequate target for monetary policy and it will take more than good interest rate policy to fix it.
Ending the Fed’s dual mandate and focusing it on some measure of price stability does not address the underlying structure of the monetary system that enabled the housing bubble: the dollar’s role as the world’s reserve currency. This system encourages massive flows of dollar-denominated debt to foreign central banks for use as reserves and international payments without the appropriate increase in output in the U.S. Asset prices rise to reflect this imbalance -- which is why we’ve experienced a litany of single-sector bubbles, from tech stocks to housing and now perhaps bonds, as this system has evolved in its current form since 197"