AP: greenspan defends handling of 90s tech bubble

AP ran a story about a speech Greenspan gave recently defending his management of 1990s bubble as the only safe option for economy.

“There appears to be enough evidence, at least tentatively, to conclude that our strategy of addressing the bubble’s consequences, rather than the bubble itself, has been successful,” Greenspan said.


Not quite true: he did make some effort to curtail the bubble with his comments about “irrational excuberance”.

The alternative was to raise interest rates quickly to make saving an attractive alternative to investing. I can’t imagine how high interest rates would have had to have gone to do that, but safe to say, it was high.

I believe, concurrently, he was trying to manage for Y2K by increasing the money supply (aka lowering interest rates). Some have pointed to Y2K spending and the flood of money as one of the root causes of the tech bubble.