Did the Feds cause the housing boom?

Bob Murphy (of the Free advice blog) provides evidence in this article from the von Mises Institute that the Fed did indeed cause the housing boom, in a way predicted by Austrian business cycle theory.  This is to contradict a popular, but apparently incorrect, theory that a glut in Asian savings markets was responsible.

To explain briefly (but please read the original article) the money to supply the malinvestment boom had to come from somewhere.  Was it funds supplied by the high savings rate in Asian counties?  Or was it Alan Greenspan keeping interest rates at virtually zero during the post-dot-com bust era?

When interest rates are depressed below market level, investors think the market is doing better than it is and will find areas of apparent growth to invest in (like housing in mid-2000s) using the supply of easy credit.  However, demand doesn’t meet this growth and market correction (bust) occurs.

Now, thinking critically, should the Fed continue to keep interest rates low to avoid market correction (funding the additional growth of previous or newly unsustanable areas via inflation)?  Or should it realize that countercyclical monetary policies are merely responsive and creating inflation will only feed into and worsen later bubbles?…  you be the judge.

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