Wednesday, March 11, 2009

Mr Lee caused the crash

Alan Greenspan, whose easy-money policy has been blamed for causing the housing bubble, hence the ensuing crash, has an interesting alternative explanation. The real culprit, he argues, was an 'excess of savings' that 'propelled global long-term interest rates progressively lower between early 2000 and 2005'. In other words, the whole sorry mess was caused by Mr Lee in his home in Hunan, socking away too much of the world's wealth instead of spending it. The American consumer, and the US economy generally, did their best to soak up this excess by running deficits over this period, but Mr Lee saved money faster than we could spend it, so that the price of money--the interest rate--kept going down. Mr Greenspan's op-ed is accompanied by a wonderful graphic (by Chad Crowe) of the Masters of the Universe chasing the bubble:


Blue skies! -- Dan Ford

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