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Here’s a letter that I sent a few days ago to the Wall Street Journal:
To the Editor:
Alan Greenspan now blames deregulation for today’s financial turmoil (“G [2]reenspan Admits Error to Hostile House Panel [2],” October 24). Whatever deregulation there was, and whatever its merits or demerits, there is one crucial financial instrument – dollars – that throughout was supplied by an utterly unjustifiable state monopoly – the Fed. Unfortunately, this decidedly unfree-market arrangement draws little attention.
Skepticism is advisable when the former head of a government-created and protected monopoly blames the market for using that monopoly’s output unwisely. Would the demand for mortgage-backed securities have been as frothy as it was if Mr. Greenspan’s Fed had not created so much new money? Would the demand for owner-occupied housing itself have been so intense? Because money plays a common and vital role in all of these transactions – and because Mr. Greenspan’s Fed kept pumping dollars into the economy with no way to know what the ‘correct’ supply is – you’ll pardon my inability to give credence to Mr. Greenspan’s latest pronouncements.
Sincerely,
Donald J. Boudreaux
This 2006 essay by Auburn University’s Roger Garrison is prescient [3].