THE FED’S EASY MONEY, THE GREENSPAN PUT, AND THE BERNANKE PUT: ANOTHER MASSIVE SUBSIDY FOR WALL STREET

Donghyun Park

Chapter 66 in Capitalism in the 21st Century:Why Global Capitalism Is Broken and How It Can Be Fixed, 2019, pp 305-308 from World Scientific Publishing Co. Pte. Ltd.

Abstract: While the aforementioned structural factors played a major role in the decline of real interest rates which, in turn, fueled investment in financial assets and the expansion of the financial industry, another key culprit was monetary policy. More precisely, monetary policy was too loose prior to the Global Financial Crisis, unleashing a flood of money into the financial markets and property markets. The crisis was, in short, the predictable result of too much money searching for profit and the consequent fabrication of profit opportunities. Where on earth, pray tell me, is there a profit in lending mortgage loans to subprime borrowers who should not be buying homes? There is perhaps a case for the government to provide low-cost social housing for those borrowers, but the only possible profit opportunity in this scenario is a fabricated, manufactured profit opportunity, the kind that ends up in asset price bubbles and crisis…

Keywords: Capitalism; Globalization; Inequality; Entrepreneur; Financial Industry; Government; Socialism; Market (search for similar items in EconPapers)
JEL-codes: A1 F00 F6 N2 P16 (search for similar items in EconPapers)
Date: 2019
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