You Austrians have it all wrong. Bubbles are not caused by inflation. They are caused by increases in the money supply. Just take a look at this:
- Monetary Policy and Asset Prices: A Look Back at Past U.S. Stock Market Booms By Bordo and Wheelock. "Two booms stand out in terms of their length and rate of increase in market prices - the booms of 1923-29 and 1994-2000. In general, we find that booms occurred in periods of rapid real growth and productivity advance, suggesting that booms are driven at least partly by fundamentals. We find no consistent relationship between inflation and stock market booms, though booms have typically occurred when money and credit growth were above average."
- The Fed found that changes in interest rates has an effect on asset prices: "The results indicate that an increase in short-term interest rates results in a decline in stock prices and in an upward shift in the yield curve that becomes smaller at longer maturities."
- And finally, asset prices should not be included in monetary policy targeting, but should be included in monetary policy.
