Today’s Wall Street Journal notes that the world’s financial problems go well beyond a credit crisis:

The original bubble was in housing prices and mortgage-related assets, which the Federal Reserve helped to create with its negative real interest rates from 2002 into 2005. This was Alan Greenspan’s tragic mistake, not that the former Fed chief will acknowledge it. Testifying before Congress yesterday, Mr. Greenspan pinned the crisis on mortgage securitizers, risk modelers and lending institutions, thus contributing to the Washington narrative that government had little to do with it. The Fed’s monetary policy apparently gets a pass. The media and Members of Congress will use Mr. Greenspan’s testimony to impugn the very free market principles that the former Ayn Rand protégé has spent his life promoting. It was a painful spectacle to watch. As for the second bubble, this one began in August 2007 with the onset of the credit panic. This is Ben Bernanke’s creation. The Fed chose to confront the credit crunch as if it were mainly a problem of too little liquidity, not fear of insolvency. To that end it flooded the economy with money, while taking short-term interest rates down to 2% from 5.25% in seven months. The panic only got worse, and this September’s stampede finally led the Treasury and Fed to address the solvency problem by supplying public capital and numerous guarantees to the financial system.

But, in the process, the Federal Reserve had created a monetary/commodity price bubble that is clearly reflected in these two charts:

As the Journal points out, the consequence of this monetary bubble is that it has left us, and the rest of the world in a much weaker position to respond to the credit crisis that, even today, continues to rampage it’s way through the financial system. And yet, both major political parties, and both major-party candidates, continue to ignore reality, as the Journal points out:

As Congress plumbs the causes of our current mess, the main one is hiding in plain sight: Reckless monetary policy that did so much to create the credit mania and then compounded the felony with a commodity bubble and run on the dollar whose damage is now becoming apparent. The American people intuitively understand what’s been done to them, which is why they are so angry. If the next President ignores the monetary roots of our troubles, he is courting the same fate as George W. Bush.

Monetary policy isn’t fun, it isn’t sexy, it doesn’t make for cute soundbites or 30 second television commercials, but it’s important and it’s been ignored for far too long. Unless we start paying attention to it soon, the Bush years may start looking like the good old days.