> They wanted high rates because ERM was the main policy goal of the prime minister. Again: no they didn't. They didn't "want" high rates. You understand how d

> They wanted high rates because ERM was the main policy goal of the prime minister. Again: no they didn't. They didn't "want" high rates. You understand how dependent the Conservatives were on home owners and the structure of UK mortgages? The reason ERM was the main policy goal of Major was inflation. The Bundesbank was the immediate cause but the reason they got into that position was inflation (if you read the research, even the die-hard Lawson fans believe that the ERM set the stage for the 1990s). Yes, the nature of the relationship between the central bank and the govt determines the response to those events. Do you realize that there have been substantial changes in this relationship since the Fed was created? The Fed is politically unable to respond. I don't understand the relevance of your point about expensive assets...that determines nothing, the market will go up and down regardless of anything.