John Taylor Calls out Ben Bernanke

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Ben Bernanke in his younger days

He politely says that Bernanke is full of it, and that low rates caused the bubble:

John Taylor, creator of the so-called Taylor Rule for guiding monetary policy, disputed Federal Reserve Chairman Ben S. Bernanke’s argument that low interest rates didn’t cause the U.S. housing bubble.

“The evidence is overwhelming that those low interest rates were not only unusually low but they logically were a factor in the housing boom and therefore ultimately the bust,” Taylor, a Stanford University economist, said in an interview today in Atlanta.

Taylor, a former Treasury undersecretary, was responding to a speech by Bernanke two days ago, when he [Bernanke] said the Fed’s monetary policy after the 2001 recession “appears to have been reasonably appropriate” and that better regulation would have been more effective than higher rates in curbing the boom.

The Taylor rule, from the Wiki:

In economics, a Taylor rule is a monetary-policy rule that stipulates how much the central bank would or should change the nominal interest rate in response to divergences of actual inflation rates from target inflation rates and of actual Gross Domestic Product (GDP) from potential GDP. It was first proposed by the U.S. economist John B. Taylor in 1993.

I'm not sure of the value of the Taylor rule, there seem to be some "miracle occurs here" bits in the coefficients used, but it is significant that someone with his sort of academic credentials (he has a fracking rule named after him) is coming out hard against the Fed Chairman's excuses.