John Taylor on the Financial Crisis

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4.7 • 4.3K Ratings

🗓️ 20 July 2009

⏱️ 58 minutes

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Summary

John Taylor of Stanford University talks with EconTalk host Russ Roberts about the fundamental causes of the financial crisis of 2008. Taylor argues that the housing bubble of the early 2000s was caused by excessively loose monetary policy, in particular, a sustained period of excessively low interest rates pursued by the Federal Reserve. Other topics covered include rules vs. discretion in monetary policy and the risks of inflation in the coming months. The conversation concludes with a discussion of the impact of the current crisis on future monetary policy and the field of macroeconomics.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty.
0:12.5	I'm your host Russ Roberts of George Mason University and Stanford University's Hoover
0:17.3	Institution.
0:18.7	Our website is econtalk.org, where you can subscribe, find other episodes, comment on this podcast,
0:25.8	and find links to other information related to today's conversation.
0:29.9	Our email address is mail at econtalk.org.
0:33.6	We'd love to hear from you.
0:35.0	Today is June 13th, 2009, and my guest is John Taylor, the Mary and Robert Raymond Professor
0:43.2	of Economics at Stanford University, and the Bowen Age and Janiss Arthur McCoy Senior
0:48.0	Fellow at the Hoover Institution.
0:50.4	His most recent book is Getting Off Track, How Government Actions and Interventions Caused
0:54.9	for Long and Worse in the Financial Crisis.
0:56.9	John, welcome back to Econ Talk.
0:58.5	Good to be back.
1:00.8	Our subject for today is your book, The Getting Off Track, Book and the Ideas There.
1:06.0	You argue in the book that much of the crisis that were in the middle of was due to excessively
1:10.5	loose monetary policy.
1:14.0	What is the evidence for that claim?
1:16.6	The evidence I focus on is that interest rates were much lower, especially in 2003,
1:23.2	2004 and 2005, then would have been expected based on the kind of monetary policy that
1:29.1	was used during much of the 80s and 90s when we had these long expansions in very short
1:35.5	recessions.
	...

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