This is hardly a surprising development. As monetary policy continues to flood the financial markets with liquidity, a trend that is expected to continue, at least in Europe and Japan, for the foreseeable future, concerns about the possible "side effects" of this policy are mounting across the board: there are growing fears that this cheap money will only sow new seeds of disruption on the markets and create price bubbles. In this sort of situation, macroprudential supervision and regulation, i.e. the targeted, market-wide use of regulatory tools to prevent systemic crisis, would appear to be a welcome deus ex machina. There are calls for a new division of labor: monetary policy would continue to focus on its main task, namely ensuring price stability – something that many monetary policymakers currently interpret as a battle against supposedly imminent deflation – and in the meantime, macroprudential supervision and regulation would tackle the unwelcome collateral damage by preventing bubbles from forming, for example on the bond and real estate markets.
It goes without saying that this sort of division of labor is destined to fail in the long run. The fact remains that not every bubble can be identified in good time and that not all measures will end up having the desired effect: rather, stringent regulations on certain transactions actually have the potential to nudge the business in question into "shadow territory" – a trend that can already be observed to a certain degree. In the long run, it will be impossible to secure financial market stability without monetary policy that gives interest rates the status they deserve as the measure of risk.