As I listened to Fed Chairman Ben Bernanke testifyto Congress on TV yesterday, I couldn't help but draw parallels to the early part of the new millennium.
Alan Greenspan was the Fed Chairman during this period of great turmoil in our country. At the time, nobody could have asked for a steadier hand to guide us through some pretty severe storms.
In response to the bursting of the tech bubble and the 9/11 terrorist attacks, Greenspan lowered the Fed Funds rate from 6.5% at the beginning of 2001 to less than 2% by the end of 2001. The rate stayed below 2% for the next 3 years.
This "loose money" policy undoubtedly cushioned the blow of some pretty serious shocks to our economic system. But as we all know, low interest rates also unleashed a wave of speculation in residential real estate, the likes of which we had never before seen. Several years of rampant speculation culminated in the bursting of the real estate bubble in 2006-2007. We have been recovering ever since.Page 1 of 6 | Next Page