Consensus Reached: The Fed Caused the Crisis

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Although Bernanke and Greenspan claim to be clueless about the cause of the financial crisis, a majority of the experts chosen by the Wall Street Journal to judge Alan Greenspan agree that the Fed’s low interest rates of the early 2000’s is the direct cause of the current recession. One economist, Judy Shelton, even calls the need for the Fed into question:

At this point, dickering over whether Alan Greenspan should have formulated monetary policy in strict accordance with an econometrically determined “rule,” or whether the Fed even has the power to influence long-term rates, raises a more fundamental question: Why do we need a central bank?

H/T to Bob Murphy

Update: Just to clarify – the experts agree that the Fed’s low interest rates caused the bubble. They do not all explicitly state that the bubble led to the bust.

11:06 am on April 12, 2009