This is my previous post:
Below, I provide some additional comments based on the following article:
Derby, Michael S., 2010. Greenspan: fiscal stimulus worked far less than expected. The Wall Street Journal, Sept. 15.
This quote quote from Mr. Greenspan sums up many of my concerns:
“'To the extent the evidence suggests very large deficits concurrently crowd out capital investment, there is a debit to the stimulus program that is somewhere between a third and a half of what the gross stimulus is,' he said."
I am not sure where he gets "a third and a half" as no references are cited. However, I do know that as government gets larger economic growth goes down. This probably has something to do with crowding out private investment.
The same theme is part of the following post:
Another aspect of Mr. Greenspan's speech that is interesting to me is the following quote made by the WSJ:
"Greenspan has himself said he overestimated the market’s willingness to understand and price for risk."
I think information is critical to make markets perform in a more efficient manner. However, as I tell the students often, I am wary that financial risk can ever be accurately calculated. This is a great concern in the adequate functioning of large-scale markets.
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