Sympathy for Greenspan
Many observers believe that Alan Greenspan’s decision in 2001-2004 to push and keep nominal US interest rates very low in order to keep the economy near full employment led to today's crisis by fueling a housing bubble. But there were plenty of other mistakes that generated the catastrophe that faces us today.
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BERKELEY – In the circles in which I travel, there is near-universal consensus that America’s monetary authorities made three serious mistakes that contributed to and exacerbated the financial crisis. This consensus is almost always qualified by declarations that the United States has been well served by its Federal Reserve chairmen since at least Paul Volcker’s tenure, and that those of us who have not sat in that seat know that we would have made worse mistakes. Nevertheless, the consensus is that US policymakers erred when: