"True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse sooner or later and to bring about a depression."
--Ludwig von Mises
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Editor's Note: Who caused the economic crisis? The federal government, the Washington establishment, the mainstream media seem to be united in opinion - that is surely wasn't anyone in D.C. But there's a growing number of economists and commentators who look elsewhere - primarily to the monetary policy of the Federal Reserve. In this week's featured essay, Stephen Lendman makes the case that the finger should be pointed right at the Fed - and "the maestro" himself. What do you think? Please stop by the blog to let us know.
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Down the Memory Hole, Alan Greenspan Style
by Stephen Lendman
He's back and in denial in a March 11 Wall Street Journal op-ed headlined: "The Fed Didn't Cause the Housing Bubble." He lied, the way he did throughout his career and for 18.5 years as Fed chairman. How else could he have kept the job, be knighted in the UK for his "contribution to global economic stability, wisdom and skill," then afterwards be extolled by the Money Trust he enriched.
So now he's preserving his "legacy" by expunging its dark side the way Orwell described in 1984 - "down the memory hole," a convenient slot for "any document....due for destruction," politically inconvenient truths to be erased to preserve only sanitized versions for the public. It's called historical revisionism, but even some on the right aren't convinced.
The Ludwig von Mises Institute is a libertarian research and educational center espousing the Austrian School economics of its namesake. Robert Murphy is one of its adjunct scholars, and in an April 14, 2008 article he asked: "Did the Fed Cause the Housing Bubble?"
"The case....is straightforward," he stated. "...Greenspan slashed the federal funds target from 6.5% in January 2001 down to a ridiculous 1% by June 2003. After holding rates at 1% for a year, the Fed then steadily ratcheted them back up to 5.25% by June 2006," a pumping and popping process that "seemed to be more than just a coincidence." It led to speculative "malinvestments," then needing a "recession" to correct.
"The Fed's role in the housing boom and bust is a classic illustration of the Austrian business cycle theory," according to Murphy. "Indeed, the Misesian explanation is so compelling that more and more economists and financial analysts are being persuaded." But not Greenspan who made his own case and got the Wall Street Journal to publish it. The problem is what he said, even worse what he omitted.
(full article) (comment on the blog)
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