Taming the Markets' Boom-Bust Cycles

The US financial markets will continue to suffer destructive boom-bust cycles until something is done about international funds flows. The US needs to break the chain of causality that runs from Chinese currency policy through Federal Reserve inaction to those recurring asset-price bubbles and their inevitable, painful ends. Regulation has little power in this. The only practical hope lies with a change in Fed policies. The problem starts with China and other countries that promote exports through currency manipulation. Because these nations strive to enhance their global competitive edge by holding the values of their currencies cheap to the dollar, they buy huge volumes of dollars on foreign-exchange markets.