Mounting risks of the continuing debt bubble in the new millennium

The multifaceted risks embedded in the debt bubble and housing boom raised questions about the role of central banks in targeting asset prices. Chairman Greenspan argued that such efforts would be ineffectual and, on the subject of rising debt, he argued that low interest rates made it possible for households to carry more debt. The Fed did not address evidence that, as household debt continued to rise in the five years before the crisis, high-income families were less affected while families with less wealth and rising debt-service payments became more vulnerable. In addition, the Fed continued to ignore the degree to which the availability of US credit depended on the support of foreign capital inflows.