Comments on: Keith Hennessey and Edward P.Lazear on the Financial Crisis http://www.arnoldkling.com/blog/keith-hennessey-and-edward-p-lazear-on-the-financial-crisis/ taking the most charitable view of those who disagree Mon, 21 Dec 2020 10:37:30 +0000 hourly 1 https://wordpress.org/?v=4.0.32 By: Lord http://www.arnoldkling.com/blog/keith-hennessey-and-edward-p-lazear-on-the-financial-crisis/#comment-123597 Mon, 16 Sep 2013 18:08:33 +0000 http://www.arnoldkling.com/blog/?p=1845#comment-123597 Well we could have squandered those inflows on military buildup, but no, there was nothing more productive we could have invested them in. We could have maintained lending standards and lowered interest rates below what they are now, made riskier investments less risky, and stemmed the inflows or just rationalized them. Transferring losses to taxpayers does do one thing, if rather inadequately, and that is reduce the amount of money destruction. One would like to believe the Fed is capable of doing that, but we should all be skeptical of them accomplishing that by now.

]]> By: Philip W http://www.arnoldkling.com/blog/keith-hennessey-and-edward-p-lazear-on-the-financial-crisis/#comment-123583 Mon, 16 Sep 2013 18:02:31 +0000 http://www.arnoldkling.com/blog/?p=1845#comment-123583 “A solution to what?” Clearly, the way they see it–which involves clearly separating out the “financial crisis” from other related problems, in part so that they can plausibly declare that their administration licked the crisis by the time the next guy came in–what most needed fixing was a total collapse in confidence in various financial instruments and firms. The government remained sufficiently trustworthy that by throwing its weight behind these instruments and firms, their value stopped crashing and, indeed, largely recovered over time–and this was accomplished without huge net transfers from taxpayers when all was said and done.

Now, as you rightly say, if you think the counterfactual wasn’t really that bad, then this doesn’t look like much of an accomplishment. Likewise if you think the current moment of weak growth is just “counterfeit,” and we are just delaying some kind of inevitable reckoning. I tend to think that Hennessey and Lazear’s position is more right than wrong, though.

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