The Federal Open Market Committee in its statement November 4 left unchanged the language that its ultra-low rates would be kept for "an extended period." By not even signaling an end to the current era of easy money, the central bank runs the risk of further inflating asset and commodity prices and sinking the dollar. The Fed's mandate is to keep inflation and employment stable. It's hard to see how avoiding bubbles — and the crashes that accompany them — shouldn't be central to its mission.

By the Full Employment and Balanced Growth Act of 1978, the Fed must maintain long-run growth, minimize inflation and maintain price stability. As the events of 2007-09 demonstrated, in order to achieve these goals it helps to avoid bubbles, the bursting of which makes prices unstable and causes unemployment. Fed Chairman Alan Greenspan used to claim that it was impossible to recognize a bubble in progress, but that does not preclude the Fed's responsibility to prevent them from developing.

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