From Ms Ruth Nash.

Sir, Frederic Mishkin attempts to reassure us that the “pure irrational exuberance bubble” presents few dangers to the economy, because it is not financed by leverage. To support his argument, he cites the bursting of the tech-stock bubble and the relatively mild recession that accompanied it. However, he fails to mention the fact that the Federal Funds Rate was cut from 6.5 per cent at the start of 2001 to 1.75 per cent by the end of that year, ultimately ensuring that the tech bubble mutated into a housing bubble. If there was nothing to fear from the bursting of this bubble, why did the Federal Open Market Committee take such drastic action?