We have seen here that the big movements in stock prices and real
estate prices in the last decade or so do not line up with movements in
long-term interest rates over the same time period. This appears to
confirm the 1988 results of Campbell and Shiller that stock prices
relative to dividends or earnings are not well explainable in terms of
present value models with time-varying interest rates.
That is Robert Schiller, in a new paper, via New Economist. And while I do think the Fed can influence real interest rates — especially short rates — this ability should not be taken for granted either. So if you want to blame the subprime crisis on loose monetary policy from the years of the dot.com bubble burst, you have some explaining to do.