When I did my “Blame Game” series, I put Alan Greenspan near the top of the list for his mismanagement of monetary policy over his tenure, always bringing back the punch bowl too fast, and never letting enough marginal entities go into insolvency. His tenure corresponds to the fast climb in the total leverage of the US economy. When debtors realize that the Fed will not deliver any real pain, they quickly pile on the debt, leading to the overleveraged condition we are experiencing now.
In a WSJ editorial today, Greenspan has the temerity to say that his monetary policy did not cause the housing bubble
As I noted at RealMoney during 2004-2006, the yield curve flattened the hard way, with the Fed raising rates, and the long end falling. I noted that China was acting as a second central bank for the US, stimulating as the Fed withdrew stimulus. But the Fed did little to counteract China’s influence
Posts
