The Love Of Money

In the discussion panel on the Credit crunch, organized by the Economics Society about a year ago, my colleague Sevi Rodriguez-Mora pointed out, quite rightly, that most of what we could say about the crisis was just to descibe its chronology. At that moment, it was not very clear what caused it, and to some extent, that it is still the case (many entries in this blog has focused on this topic). The recent three-part BBC documentary The Love of Money illustrates perfectly this problem. Two of its parts ("The bank that bust the world" and "Back from the brink") recount the events that preceded and followed the fall of Lehman Brothers on 15th September 2008, widely considered as the starting point of the crisis. That "journalistic" narrative is interesting to a certain extent, but ultimately unsatisfactory to any economist who wants to understand the actual causes of the crisis.

The middle part of the programme, "The Age of Risk", does a much better job at uncovering the causes of the financial meltdown we experienced a year ago. According to it, its main culprit was Alan Greenspan. In the documentary, his career from just an unknown economists to head of the Federal Reserve is paralleled to the rise of the belief on self-regulating markets. The last five minutes of the programme are especially revealing. There, a tired and defeated Greenspan confesses that he still does not understand what went wrong. His surprise and disbelief is, at the same time, very telling, and very moving. It is probably the highlight of this interesting programme.

The website for the programme is here. You can watch each individual episode just by clicking on the links above. And then answer, is Greenspan to blame?