Well, at least during the first five years of this century Greenspan actively encouraged a relaxation of lending standards in real estate.

Yes. Precisely. Go after him for that, not for his interest rate policy. There is nothing wrong with low interest rates. There is everything wrong with adjustable-rate mortgages and NINJA loans.

What US actions, other than the relatively low interest rates, contributed to the Asian and Russian debt crises?

The Asian crisis didn't have much of anything to do with US policy - that was driven by the end of the Yen carry trade, a carry trade that had gotten started in the deflationary environment in the early '90s, which was caused by the bursting of the 1980s Japanese bubble, caused in turn by aggressive offshoring hollowing out the real value added by the Japanese economy.

The Russian crisis was caused by Timmy Geithner and the rape-and-run "transition" policies foisted on Russia during the '90s.

The Y2K bubble was certainly also encouraged by direct spending on infrastructure and rationalized as a prophylactic against Y2K bugs.

And the repeal of Glass-Steagall, and the deregulation of the futures markets, and the (further) deregulation of mergers and acquisitions, and the lowering of the corporate tax rate.

But thanks for the comments about the feasibility of bubbles even with high interest rates. At this point that is an historical curiosity, living as we do at the lower bound of interest rate policy.

No, it's not, because unless you remember that bubble formation is independent of interest rates, you risk concluding that bubbles require low interest rates, and that high interest rates can kill bubbles before they kill the rest of the economy.

But I do strongly suspect that the price of precious metals has been strongly manipulated

Well, duh. The price of precious metals is nothing but manipulation. The principal commercial use of precious metals is as a component of Veblen goods - goods that are valuable (almost) exclusively because they are expensive. And even that is dwarfed by the transactions that are purely speculative in nature.

The gold bugs are just bitching that central banks are muscling in on their turf and manipulating the price down instead of up. Because that prevents said gold bugs from fleecing the suckers who go "ooh shiny" quite as hard as they could otherwise. Oh, central banks have no proper business playing that game. But of all the things central banks do that they have no business doing, that strikes me as by far the least harmful.

I think I have finally found a way to play bullshit to my advantage, especially in silver, where I am approaching a 200% gain since Aug. '09, so indulge me that, ok?

By all means, if you've found a way to make money in the precious metal markets, then don't let the fact that it's disconnected from any economic fundamentals discourage you. I like you better than the other croupiers at that particular casino, so I don't begrudge you the money or anything. I just don't see what it has to do with macroeconomics or currency policy.

- Jake

Friends come and go. Enemies accumulate.