"the Fed's culture is, of necessity, antithetical to deflating asset bubbles. To set monetary policy, the Fed continuously collects production and price data to which it applies what it considers the best of macroeconomic theory. The Fed accepts this theory as true because the information it collects is constantly changing; if applicable theory was also in constant flux the Fed's interest rate policy making would be paralyzed. As a result, the Fed's culture values the steady application of conventional thinking.

Bubble-detection has not thrived in this culture. At the end of 2004, the New York Fed conducted a study to answer the question, "Are Home Prices the Next 'Bubble'?" Applying conventional economic theory to publicly available data, the study concluded there was no bubble in home prices.

The culture of the regulator assigned to spot asset bubbles must have a decidedly outside-the-box flavor. Indeed, in culture, the regulator should seek to be the anti-Fed. In markets periodically subject to herd behavior, the regulator must be adept at developing contrarian views that are likely to be supported by non-public data. Once such data is obtained, publication of the regulator's views of the respective asset class will, at a minimum, divide the herd."

I know all this inspires such confidence in our National Economists.  Especially after those earning, oh, Nobel awards complain about their lack of understanding of the fundamentals of macroeconomics.

It's time we all educate ourselves, and remember that whenever someone says something's too hard to understand, they usually have an interest in you not understanding it.