Tuesday, December 16, 2008

Evidence that the Fed Caused the Housing Boom

Housing Boom
Daily Article by Robert P. Murphy | Posted on 12/15/2008 12:00:00 AM


In this forum I have argued that Alan Greenspan's low-interest-rate policy after the dot-com bust and 9/11 attacks sowed the seeds for our current recession and the housing bubble. I have also criticized the alternate theory that a foreign "savings glut" was the true culprit, rather than the Fed. In the present article, I want to deal with a few empirical objections to the case against Greenspan. That is, several different economic analysts are familiar with the theory that "the Fed did it," and they claim that the facts just don't add up. In the space below, I hope to demonstrate that the evidence against Greenspan is indeed damning.

Greenspan's "Smallish" Injection

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