If I have to blame someone, it would be Greenspan, who
1) lowered i to 1%
2) increased liquidity so much that the risk premium almost vanished. Investors bought MBS at 100% LTV.
Greenspan’s legacy will be the creation of asset bubbles. Everyone loved him while the party was going strong, but when you have a hangover you question whether all that partying was really worth it. At my age, I’ve figured out it isn’t. Maybe the government will someday be that wise too. (Not being conceited, actually I’m just too old for hangovers)
