To do that, it isn't enough to regulate the money supply; you also have to regulate the availability of credit.

Hmmm...even Soros is not aware that money is bank credit then...

There won't be another bubble because the pyramid of credit we have just seen, and which is now slowly deflating, was supported only partly by Bank capital.

For the most part the pyramid was supported by Investors' capital through:

(a) securitisation;

(b) credit derivatives;

(c) credit insurance by Monolines eg Ambac.

This "outsourcing" to Investors has to all intents and purposes ceased.

It follows that the availability of credit does not remotely come close to that necessary to support asset prices anywhere near current levels, never mind to support investment in new productive assets and the working capital needed for the economy to flourish.

The Anglo Disease has had another interesting side effect and that is that as income for the many has declined, so has the capability of retail investors to make deposits (aka savings).  

The top 10% of investors (who were the gainers in all this as wealth concentrated in their hands) typically do not make retail deposits, I suggest, but put their money in hedge funds, private equity and the like.

We have therefore seen a secular decline in the ratio of retail vs wholesale deposits, and if the wholesale market dries up, the Central Bank is the only means of making up the difference. Northern Rock was only the beginning, IMHO.

"The future is already here -- it's just not very evenly distributed" William Gibson