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It wasn't us: Alan Greenspan and Ben Bernanke still do not believe monetary policy bears any blame for the crisis

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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

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... 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. ...

3 Comments – Post Your Own

#1) On March 21, 2010 at 4:56 PM, whereaminow (20.94) wrote:

The Bank of England's ex-Governor disagrees.  He says, "yes sir, we did it and we did it on purpose."

The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession, the former Bank Governor Eddie George admitted yesterday.

Lord George said he and his colleagues on the Monetary Policy Committee "did not have much of a choice" as they battled to prevent the UK being dragged into a worldwide economic slump by slashing interest rates. And he said his legacy to the current MPC was to "sort out" the problems he had caused.

One of these guys is lying and I know it is.

David in Qatar

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#2) On March 21, 2010 at 6:18 PM, blesto (31.86) wrote:

Apologies for getting off topic, But how do you do that?

That is how do you change or make your links ( Read Full Article  , disagrees ) like that?

 And getting a little back on topic,

All of that double speak from Greenspan and Bernanke just makes my head spin. 

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#3) On March 21, 2010 at 7:15 PM, binve (< 20) wrote:

whereaminow ,

Yep at least the BoE has the balls to say we were being reckless but we didn't have a choice (which is not true. But they are saying they took a course of action and they understood the consquences)

Bernanke and Greenspan, on the other hand, come off as either liars or idiots ... and because they are not idiots the only logical conclusion is that they are liars. Which means they should be getting Nobel Prizes for Economics any day now (based on the current benchmark of Krugman).

>>One of these guys is lying and I know it is.

exactly :) Thanks man :)

blesto,

You can either do that with the link function above your comment area, or you can just code the HTML directly.

to do a link, write [a href="URL_TO_ARTICLE"]LINK_TITLE[/a]

but replace [ with < and ] with >

>>All of that double speak from Greenspan and Bernanke just makes my head spin.

LOL!  "I'm so dizzy ... " :) ..

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