04 Apr 2009

Susan Lee Demolishes Greenspan

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David Henderson (disapprovingly) links to Susan Lee’s Forbes piece where she deals a death blow to the “savings glut” theory of the housing boom. Assuming her data are correct, I think hers is the single best indictment of Greenspan I’ve read, including my own articles.

My favorite part of the article is her chart of global savings rates, going way back. As with several other elements in this debate–like Chicago’s Casey Mulligan declaring that mortgage rates weren’t unusually low during the housing boom–it turns out that the “savings glut” claim is exactly backwards. See for yourself. Does it make sense to blame the worst crisis since the 1930s on a global savings glut in the mid-2000s?

NOTE: I don’t understand how global investment can be consistently higher than global savings. At the EconLib thread I asked if the planet ran a trade deficit with Mars.

UPDATE: Here is Henderson and Hummel’s response to a lot of these issues, including the drop in the global savings rate.

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