Some Advice for Alan Greenspan; For reasons that are not altogether clear, you seem adamant about keeping interest rates at rock-bottom levels. That's asking for trouble.

Byline: Stephen S. Roach, Stephen S. Roach is the chief economist at Morgan Stanley

Dear Mr. Chairman: Who would have thought that the U.S. economy would have come through the stock-market bubble of the late 1990s in such remarkable shape? I sure didn't, but obviously, you did. My congratulations on a job well done.

Of course, you know better than anyone that a central banker's work is never done. There are always unexpected problems that require forceful policy responses, and that's what worries me. I am concerned that your successes may have come at the cost of creating more serious problems in the future. I am equally worried that your strategy closes off the options we will need to cope with these threats.

This issue goes to the heart and soul of economic policymaking. Mr. Chairman, I don't have to tell you that policy strategy requires a touch of art as well as science. But it also needs common sense. Like war, one of the basic principles of stabilization policy is never to run out of ammunition. Policy stimulus is to be used in bad times, but when circumstances improve, it is critical to "reload the cannon" to prepare for the next battle.

With the federal funds rate at only 1 percent, what can you at the Fed do for an encore, should you need to respond to an unexpected problem? For that reason, I would urge you to raise the federal funds rate immediately to 3 percent in order to restore some semblance of normalcy to financial conditions.

Unfortunately, for reasons that are not altogether clear, you seem to be adamant about keeping interest rates at rock-bottom levels. If you want my opinion, that's asking for real trouble. It raises the risk of another bubble. As soon as you take interest-rate risk out of the equation, you re-create the "moral hazard play" that became central to the Great Bubble of the late 1990s. Investors and speculators alike will be quick to take advantage of a Fed that is not about to stand in the way of vigorous growth in the economy and rapid appreciation in asset markets.

There are already signs of such excesses. Property markets are frothy and so are government bonds, credit instruments, high-yield debt, and tech stocks (again). Here we are, only four years after the bursting of the first bubble, and the risks of new bubbles abound.