By far, the economy was the top issue in this year's US presidential election. According to exit polling, 62 per cent of voters considered it the most important issue affecting their vote. Thus, the new Obama administration and Democratic-controlled Congress would be wise to consider the source of our economy's problems: the Federal Reserve board's failed monetary policy.

The best way for the Fed to determine whether there is too much or too little liquidity is to use inflation-sensitive, forward-looking market price indicators as a policy guide - what supply-siders call a "price rule." After all, inflation is simply the relative change between the balance of money and the balance of goods. Therefore, real-time market price indicators such as the dollar exchange rate, long-term interest rates, and commodity prices, including gold, oil and food commodities - viewed in conjunction with one another - provide the most reliable signals about both the demand and supply of money.

In the late 1980s and early 1990s, former Fed vice-chairmen Manuel Johnson and Wayne Angell were successful in encouraging the Greenspan Fed to focus on these indicators, ushering in the era of low inflation. But in the late 1990s, the Fed abandoned this price rule approach. By 1999-2001, when the stock market was hitting then-record highs driven primarily by dot-com start ups, the Fed was tightening monetary policy significantly. Alan Greenspan, the former Fed chairman, was applying a de facto Phillips Curve Model, which postulates that a growing economy carries significant inflationary pressures.

That was the wrong approach at the wrong time. With the boom in the stock market there was an unprecedented demand for money. Simultaneously, however, commodity prices were plummeting. Gold had dipped to its lowest real price since 1973. During that period oil fell to $19 per barrel and corn had dropped below $2 per bushel, the lowest level in three decades. With money demand rising and commodity prices down, applying the price rule would have lead the Fed in the opposite direction, but as Mr Greenspan himself said, "I rarely use commodity prices as a single useful indicator for broad inflation."

Once the dot-com bubble burst and the economy began to fall into recession, the Fed was then forced to abruptly reverse course and restore some liquidity to the economy that it had previously withheld. Mr Greenspan, therefore, lead an aggressive assault on the Federal Funds target rate. Indeed, interest rates were cut 11 times during the 12 months of 2001. The Fed Funds rate eventually hit 1 per cent in 2003.

That decision helped to create the housing and credit bubble from which the US economy is still reeling. Mortgage rates hit record lows. Meanwhile, housing prices were increasing at a record rate, driven in large part by increasing commodity prices. From 2000-2003, mortgage rates dropped by about 35 per cent while median home prices increased 40 per cent. Previously, it had taken from 1986 to 2000 for the average median home price to appreciate by 40 per cent.

The economic carnage caused by the Fed-induced housing bubble has caused many to reassess Mr Greenspan's tenure. He has gone from being considered the "world's greatest central banker" to the economic policy-maker singularly responsible for the collapse in the financial markets and the economy. Indeed, the excesses of the housing boom, brought on by Mr Greenspan's monetary policy, led to an inventory of over leveraged mortgages and mortgage backed securities that placed lenders in a high-risk environment. Unfortunately, current Fed chairman Ben Bernanke, by following the Greenspan model, made the situation worse.

Starting last year, Mr Bernanke has slowly cut the Federal Funds rate from 5.25 per cent to 1 per cent in October, ostensibly to improve liquidity in the market. Another perspective, however, is that the Fed lowered the price of money at a time when lenders were worried about their profitability. This did the credit sector no favours - every time the Fed cut rates, lenders received less income from adjustable rate mortgages. Moreover, these rate cuts came at a time when commodities were reaching record highs; oil rose to $147 per barrel, corn to $7 per bushel and gold broke a record closing above $1,000 per ounce. Indeed, like Mr Greenspan's strategy during the end of his tenure, Mr Bernanke is eschewing the price rule to the same ruinous effect.

If Mr Greenspan had followed a price rule in 1999, there probably would not have been the commodity price deflation that we saw in 2000, As a result, there probably would not have been a housing bubble and there might have not been the economic crisis. As President, Barack Obama and the Congressional leadership should urge the Fed to adopt a price rule. They should join forces with a group of House Republicans, led by Jeb Hensarling, who introduced legislation to repeal the Humphrey-Hawkins Full Employment Act (which diverts the Fed's attention from long-term price stability), and require the Fed to establish a price rule to guide monetary policy.

Blaming the Bush tax cuts and financial deregulation may have worked to Mr Obama's advantage in the election. Neither of these factors, however, were at fault. If the Obama administration and Congressional Democrats want to stabilise the economy, promote growth and prevent future bubbles they should use their new found power to push a new bipartisan consensus on monetary policy.

Cesar Conda and Davey Juday are former domestic policy advisors for vice president Dick Cheney and vice president Dan Quayle, respectively. Mr Conda is a principal of Navigators Global, a Washington DC public affairs consultancy. Mr Juday is a commodity market analyst