Greenspan Blames Fall of Berlin Wall, Not Fed or Subprime Crisis, for Housing Bubble

KUDLOW: “But John Taylor from Stanford and others have done econometric work and they have come around to the view, and you know Taylor's not a crazy guy, he's a conservative. He says Alan Greenspan, you were a great Fed chairman for all those years, except from 2002 to 2005 you kept rates too low for too long and that created the bubble.”
GREENSPAN: “John is terrific. He used to work for me. We are very good friends but we really disagree. Let me tell what you the take is on why I think that argument that he's making is wrong. If you look at the -- it's not the issue of, first of all, subprime, that's a minor -- almost a minor issue. The real problem is that when the Berlin Wall came down, the economic room behind the Iron Curtain was so debilitating and so unexpected that the Third World, which is what we now call the developing world, which had been largely collectivized with Fabian socialism and regulation, switched very dramatically towards market capitalism.”
KUDLOW: “And that money flowed here? Is that what you're saying? From the Berlin Wall to the U.S. markets?”
GREENSPAN: “China basically was the big mover, India's also moved. But the data show that since then, the rate of growth in the developing world is also running at twice the rate of growth of the developed world. The cultures in those societies are such that they can't spend it all and indeed China has a 50 percent savings.”
KUDLOW: "And we got the backwash, we got the backwash."
GREENSPAN: "We got this huge flow of savings, which suppressed the real rate of interest not only in the United States but everywhere."