Greenspan looks forward

Writing in the WSJ former Federal Reserve chairman Mr Alan Greenspan argues that it wasnt the Fed's interest rate policies that overly stimulated asset markets it was the massive shift by centrally controlled governments to market economies;

the presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition.

Having made that point he then argues that the current situation may be beyond adjustments to monetary policy

if it is monetary policy that is at fault, then that can be corrected in the future, at least in principle. If, however, we are dealing with global forces beyond the control of domestic monetary policy makers, as I strongly suspect is the case, then we are facing a broader issue.

Those global forces being

Global market competition and integration in goods, services and finance

Governments and their central bankers need to look beyond "stimulus packages" and quick fix populist measures like infrastructure spending and executive salary caps.

Alan Greenspan again

If we are to retain a dynamic world economy capable of producing prosperity and future sustainable growth, we cannot rely on governments to intermediate saving and investment flows. Our challenge in the months ahead will be to install a regulatory regime that will ensure responsible risk management on the part of financial institutions, while encouraging them to continue taking the risks necessary and inherent in any successful market economy.