• Heritage Action
  • More

Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis

Recorded on April 27, 2009

Location: The Heritage Foundation's Lehrman Auditorium

Throughout history, financial crises have always been caused by excesses - frequently monetary excesses - which lead to a boom and an inevitable bust.  In our current crisis it was a housing boom and bust that in turn led to financial turmoil in the United States and other countries.  How did everything deteriorate so suddenly and dramatically?  In Getting Off Track, Hoover Institution Senior Fellow and Stanford Economist John B. Taylor offers empirical research to explain what caused the current financial crisis, what prolonged it, and what worsened it dramatically more than a year after it began.

Dr. Taylor tells how unusually easy monetary policy helped set the crisis in motion, as interest rates at the Federal Reserve and several other central banks deviated from historical regularities.  He examines monetary interaction with the subprime mortgage problem, showing how the use of these mortgages, especially the adjustable-rate variety, led to excessive risk taking.  In the United States this was encouraged by government programs designed to promote home ownership, a worthwhile goal but overdone in retrospect.  Looking ahead, Dr. Taylor suggests a set of principles to follow to prevent misguided actions and interventions in the future.

John B. Taylor is the Bowen H. and Janice Arthur McCoy Senior Fellow at the Hoover Institution and the Mary and Robert Raymond Professor of Economics at Stanford University.  He has served as the Director of the Stanford Institute for Economic Policy Research and was Founding Director of Stanford's Introductory Economics Center.  In 2007, he was awardeded the Adam Smith Award from the National Association for Business Economics (NABE) for his work as a groundbreaking researcher, public servant, and teacher during a career of more than 30 years and his outstanding leadership in the field of economics.