Central Bank Battles Against Bubbles

In a Wonkblog post Matt O'Brien discusses central bank efforts to deal with bubbles. His starting point is the decision by the central bank in Sweden to begin raising interest rates in 2010, ostensibly to head off the development of a bubble there.

There are two points worth noting here. First, it is difficult to imagine what the central bankers were drinking in Sweden when they decided to start shooting at bubbles. A bubble that threatens the economy is a bubble that moves the economy. If th...