Low rates didn't cause bubble, Bernanke says

[opebo]

It isn't precisely reasonable to say 'low interest rates caused' 'the bubble', as if that were a definitive illness and symptom.

The reason for excessively low interest rates is that this is the only policy lever allowed us by our right wing government.  What is missing in the modern economy is redistribution and demand-support.  Obviously we should have low interest rates, but in addition to this it is necessary to for the State to redistribute wealth on a massive scale, both through all-encompassing welfare programs and through legislated increase in working class incomes (such as unionization, etc). 

The illness is - the capitalism, and its intrinsic inequality and demand-dearth.  To blame the palliative it was given - low interest rates - for not curing the problem, is like blaming the morphine for not curing the cancer patient.

[opebo]

I really wish there was a simulation where we can hold certain events like "mortgage underwriting standards" and "1% federal funds rate" and isolate it. I have a feeling he has good points but is still not giving enough weight to the low Fed Funds rates from 2001 to 2005.

Of course he isn't giving enough blame to low interest rates? Why would he? He knows low interest rates largely caused the bubble(along with some other less important factors), but he does not want to damage his buddy Greenspan's reputation.

But the point is that it wasn't low interest rates that caused the bubble, Nappy.