When John Stossel of Fox Business Network wrote his recent “Memo to Alan Greenspan” column, he recounted many of Greenspan’s failings while Chairman of the Federal Reserve, including especially Greenspan’s relentless expansion of the money supply and lowering of interest rates that set in motion the housing bubble that burst in 2007.
Most people — except possibly the American political class — know that one of the prime causes of the current economic crisis was government policies that resulted in countless people taking out mortgages that they couldn’t possibly pay back. Then financial firms who had made the bad mortgages issued securities backed by these shaky loans. When the borrowers defaulted, the whole house of cards came tumbling down — or at least it would have come tumbling down if the federal government hadn’t bailed out so many firms, delaying the day of reckoning.
The continuing implosion of the U.S. economy in the aftermath of unprecedented federal bailouts and unemployment programs has now brought forth a stunning loss of 484,000 jobs in a single week. What remains uncertain is when this news will penetrate the consciousness of policy makers in the White House and on Capitol Hill.