Source . So saith the wise Posen. -Jon

Of course, our current regulatory regime has caused the problem to become even worse then it otherwise would have. “Follow the rules and we won’t let you fail,” would cause problems even without monetary expansion.

Which, if for no other reason, shows why the analogy falls over. Here’s a question. Even if it is possible to have an expansionary monetary policy that doesn’t result in booms and busts because we have designed the perfect regulatory framework to keep it in check, what’s the point? If a tight mone…

“It is time for us to focus on the regulatory reforms we need” We must take great care on how to proceed with such regulatory reforms. Countries such as Venezuela, Bolivia and Ecuador recently had their “ultimate” regulatory reforms in the form of the Constituent Assemblies, which redrew constituti…

No matter how many times people say it…, activist monetary policy did not cause the bubble. Looser money is a necessary pre-condition for a bubble, but it is not sufficient to cause one on its own. Philosophically your argument is correct. However, lets go back to principles of supply and demand. Y…

RESPONSE FROM WOLF Martin Wolf: Let me also add a comment on Adam’s remarks. Let us agree that monetary ease is merely a necessary condition for a bubble, not a sufficient one. I would put it as follows. Aggressive monetary ease is like pouring petrol on straw. That may well not start a fire, as …

Since everyone agrees that “loose” money is a necessary precondition for a bubble, why isn’t the logical conclusion to rid ourselves of the “looseness”, being the Fed? Also, I think Martin Wolf mis-identifies the “pyromaniacs”. It seems from his response that he thinks the pyros are wall street inv…

Well, we can’t get rid of it because according to Posen it’s like winter… and we can’t get rid of winter.

gasp I’m drowning in this ocean of false analogies.

Greed is self interest, and is the driving force in any non-socialist economy. Greed is in no way the negative thing that it has been made out to be pseudo-socialists, or economists with false pretenses like yourself. If people could and would not act in their own interest, there would be no true a…

But we can get rid of the fed, so the analogy is faulty.

"Activist Monetary Policy Did Not Cause the Bubble"

Economics Economics Questions

Fried_Egg October 26, 2008, 2:08am 12

Wht about the theory that explains the explosion of credit on the large levels of savings in the east? These were used to fund the large levels of borrowing in the west. Discussed in more detail here: Another Explanation

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"Activist Monetary Policy Did Not Cause the Bubble"

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