I can't believe Bernanke actually thinks this thought. Not only does he think it, he actually said it out loud. Not only uttering it out loud but even said it in public. But not just in public, he actually said it in front of The House Financial Services Committee!
What did he say? When asked by Ron Paul if interest rates were held too low for too long in the beginning of this century he said, "The bottom line is that nobody really knows for sure but that the evidence is really quite mixed and I would say that even if they were too low for too long, the magnitude of the error was not big enough to account for the huge crisis we had. I think what caused the crisis was the failures of regulation...it was the weakness of the regulatory system not monetary policy that was most important here."
There you have it. I've linked it here if you have the stomach to watch. The Fed did not make a mistake in monetary policy, there only mistake was in a lack of supervision. It is both fascinating and unbelievable depressing to know that the Chairman of the Federal Reserve is one of the most deluded economists on the planet. He maintains that it was a lack of regulation and not low interest rates that caused our credit bubble. Come on Ben! If rates are kept artificially low for too long it spurs excess risk taking, encourages profligate consumption and increases debt levels. If he really believes otherwise we are doomed to repeat the same mistakes again.
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