Thursday, 23 March 2017

History of Money

“Greenspan’s Monetary Policy in Retrospect”

Posted by Tom Duncan
February 23, 2010

“Critics charge Greenspan with having carried on an excessively expansionary monetary policy, particularly following the recession of 2001. They note how low interest rates were from 2002 through 2004 and argue that those low rates paved the way for everything from high prices at the pump to high prices at the supermarket, from the housing crisis to the financial crisis. In so doing, those critics make the classic mistake of using interest rates to evaluate monetary policy, reasoning that if interest rates are low, recent monetary policy must have been expansionary. It is not the Federal Reserve but supply and demand that ultimately determines interest rates. Although central banks can push rates up or down to some degree, the globally integrated financial system reduces the Fed’s ability to significantly influence rates.” Read more.

David R. Henderson and Jeffrey Hummel
Briefing Paper, No. 109, November 3, 2008.