Yes the title is slightly misleading - are we sure that there is an asset price bubble? Well, house prices and stock prices have increased, despite low economic growth for the last few quarters. Credit extension to households continue to increase. All of this smells like a bubble.
Let us put our differences aside for the moment and continue from the previous posts regarding the conduct of monetary policy. Should the SARB do something about asset price bubbles? If so, should they prick the bubble, mop up the effects after it bursts or do something else?
I am not sure about the right answer. Roubini believes that central banks should burst it. In it he highlights the reasons for and against (check out the reference list).
I think the SARB is facing one of its toughest trials yet. Good luck!
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