“…it is essential that we not be deluded into believing that we have somehow discovered the Rosetta stone of monetary policy…..what specifically constitutes money is a notion that has, so far, eluded our analysis.” – Fed former Chairman A. Greenspan
Absolutely right, eluded and deluded in the double sight and minds of the Siamese twins. Yet it had nothing at all to do with the then head of the Choir or the sidekick. Absolutely not! It is purely the fault of the Wild West unleashed mortgages and runaway lending that led to the “bubbly”, that is all. It had nothing to do at all with the full fledged accommodative ‘monetary policy’ that was in place, which in the first instance facilitated such to happen. No way!
In fact, accordingly it had nothing to do with the sidekick at all! Even though, as far back as in 2005, a blind eye was given to the then already “hyper prices” of houses aiming straight up, doubled in less than seven years as pointed out in the Economist in 2005. Or as stated with multiple other examples from the multiple condos in Miami to ‘skyrocketing’ prices. Yet the Siamese twins: neither the Chair nor his sidekick did a thing! Their “regulatory” blinds were not in use, as billions of dollars on the mortgage big whammer was rolling high. That is of course, until the big slammer hit them in the face. Then apologetically, the ‘Chair’ wept alligator tears of apology, which of course did not bring back one single cent to those thousands who had lost all, or the billions in tax payers’ money to dwindle them out of their created, manipulated, and ill regulated mess! While of course, we are still waiting for the apologetic tears of the ‘sidekick’, but wait a minute, this is the new Chair, fully prized that is, what irony!
So the money extravaganza rolled on. Easy, cheap money was the main ingredient for whosoever and for whatever reason. Splurging out mega bucks, without any proper checks or balances in place. Cheap money or money, which is below the adjusted ‘inflation value’ and which logically, provides a subsidy to borrowers. Thus the ‘money a plenty’ splurges and ‘party a plenty’ for an orgy of speculators. And why not, which rational minded person seeing an opportunity to make mega bucks quickly and easily would not leap at it?
Nevertheless, the bottom line is that low interest rates were the cause of the bubble, which is controlled by “monetary policy”. Period! The feeding frenzy with enough foresight and now aftersight could have been avoided as many would logically state by the raising of rates and reducing the flow of credit. Simple, but the party was too good and the meat was too juicy to stop. For if we are convinced that both lenders and borrowers are convinced that prices will go up, with our specific mortgage products of course, and then up they go! Yippee! Perhaps a book with a simple explanation on consumers “irrational behavior” would be of kind assistance here.
But lest we forget, accordingly, there has been considerable work as stated to strengthen and correct and improve the supervisory policies and practices exposed by the weaknesses in the system. That is stronger and tougher substantial legislative and “regulatory reforms” to ensure that the problems identified and exposed by the ‘crises’ do not reoccur. Really? Where? When? How? In securitizations? In balance sheet or off-balance sheet operations? Or perhaps in capital requirements, or compensation? Or just maybe in derivatives trading? Where oh where? Or why not, just leave us alone: as is, we love the ‘status qou’. For we fully know of course that if, just if another big ‘bubbly’ of any size or shape, we have the full faith in our universal bank, stamped and sealed to come to our rescue. That is regardless of whatever consequences.
On the other hand, though, we cannot deny the fact that “innovation” did play a role in the creation of the multitude of new products, loans and created new niche of credit programs which increased accessibility across a wide sphere of consumers. So in some way it could have turned out to be a very “good” thing. But it did not obviously. And thus, this in no way erases the fact that what was ‘wrong was wrong’ and who are the ‘culprits are the culprits’. Negligence, incompetence, or deliberate calculation? Only the Chair and his sidekick will ever know, but both are equally at fault and the buck stopped with them; before the slammer spread its fangs across oceans and borders and infiltrated the rest of the globe. They created the environment, they sustained and watered that environment, they saw it expand and expand, they enabled it to happen, they saw the billions and billions and then they saw it explode in catastrophic proportions. That is as plain and as simple as it gets to set the historical record straight. Thus, it is only right that the responsibility and the lack of responsibility be given to those where it is due. Plain and simple.
