Current conventional wisdom holds former chairman Alan Greenspan responsible for the Fed’s mistakes— such as keeping interest exceptionally low in 2002-2006 and not tamping down on excessive lending by banks. That staved off the recession in the aftermath of the stock market collapse, but created the twin credit-property bubbles and the current mess. John Taylor’s analysis of Fed’s easy money policy shows the central bank’s pivotal role in causing the crisis. And Gerald O’Driscoll of the Cato Institute makes short shrift of Greenspan’s responses to Taylor’s critique...
No question, Wall Street drank deeply and to its detriment. But that’s what financial people do, they make money from whatever opportunity that offers. It’s the Fed that created the opportunity, watched the party get out of hand and now will run a rehab center, further extending its reach. Great for the Fed.
For the rest of us, until we learn to impose limits and controls on government agencies, we will remain at the mercy of wrong-headed interventions, which create the problems that then lead to more interventions, more problems and so on. The Fed’s brief should be limited, not expanded. We appear to be going in the wrong direction.
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