I want policymakers out of the business of targeting or tinkering with the asset markets and market yields. Instead, the focus should be on creating a backdrop of stable money and Credit. The problem today is that central bankers for years ignored a historic expansion of Credit (much of it directed to the asset markets) and the resulting Monetary Disorder. Now, to avert systemic implosion central bankers at home and abroad have resorted to unprecedented measures to expand Credit and intervene in the markets' pricing of Credit. Instead of a movement toward constructing a more stable global Credit system and backdrop, policymakers have instead jumped farther into the uncharted waters of unconstrained Credit expansion. Such a backdrop is ultra-conducive for ongoing speculation, Bubbles, and general disorder.

Again, Bubbles are first and foremost a Credit phenomenon. Fundamental to the nature of Credit, expansion generally fosters more expansion. Credit excess begets only greater Credit excess. And Credit excess notoriously begets speculative excesses. Importantly, Credit is inherently self-reinforcing – both on the upswing and downswing. In today’s “system” of unrestrained Credit, rising demand for borrowings does not dictate an increasing price for this Credit. Indeed, an unlimited supply of Credit will tend to satisfy rising demand at a lower price. And this gets right to the heart of a huge Bubble – and policymaking - dilemma.

The bottom line is that unrestrained Credit is inherently unstable, and few seem to appreciate the unique nature of today’s unfettered global Credit environment. There is no international gold monetary regime for which to discipline lenders, central banks, governments or economies. The dollar reserve system self-destructed over decades of undisciplined Credit expansion. And the breakdown of U.S. discipline – and the resulting massive dollar devaluation – has unleashed domestic Credit systems from China to Brazil. Never have “developing” Credit systems (and currencies) enjoyed such freedom to inflate financial claims.