It wasn't us: Alan Greenspan and Ben Bernanke still do not believe monetary policy bears any blame for the crisis
March 21, 2010
– Comments (3)
Nothing really new in this article. Saying what many of us have been pointing out for a long time. But it still makes me very angry.
It wasn't us: Alan Greenspan and Ben Bernanke still do not believe monetary policy bears any blame for the crisis
Mar 18th 2010 | From The Economist print edition
Read Full Article
... the biggest gap between Mr Greenspan and conventional wisdom lies in the role of monetary policy in causing the crisis. In Mr Greenspan’s telling, central banks were innocent and impotent bystanders in a global macroeconomic shift. Thanks to the end of the cold war and reform in China, he argues, hundreds of millions of workers were absorbed into the global economy. As GDP growth in emerging economies soared, their consumption could not keep up with rapidly rising income, and saving rose. The rise in desired global saving relative to desired investment caused a global decline in long-term rates, which became delinked from the short-term rates that central bankers control....
...There is something odd about central bankers denying any responsibility at all for long-term rates, which are, in principle, based partly on an assessment of a stream of short-term rates. Nor is it clear that low short-term rates were as irrelevant as Messrs Bernanke and Greenspan suggest. Jeremy Stein of Harvard University, a discussant of Mr Greenspan’s Brookings paper, points out that low policy rates may have mattered a great deal for income-constrained borrowers. He points out that adjustable-rate mortgages were used much more in expensive cities, a trend that became more pronounced as the fund rates fell. ...
RSS Headlines
Fool UK