Greenspan had his hands tied

Is the US dolar exchange rate free to float? According to an HBS professor, its not. Let me explain. The Chinese central Bank (as well as other many Asian Central Banks), buys a very large amount of US T-bills to accumulate foreign reserves. This as well pemits the Chinese Central Bank to maintain its currency, the yuan, devaluated. This allows the Chinese to continue exporting at very low prices. This spurs Chinese growth. The demand for US T-bills allows the US to keep its interest rates low and hence push consumption forward. This impedes the US to have its own monetary policy. So for everyone that thinks that the crisis is Greenspan's fault, think again. He did not cuse it and could not impede it. The crisis was caused by the fact that subprime mortgages were not paid, which made mortgage backed securities to fail, which made banks go broke. The US and you may read in a post below, was running (and still does, since the government is spending so much, and the Chinese Central Bank still buys T bills) a Ponzi scheme. The effects of the crisis are just being pushed forward in time, if policy is no adequate, we might be facing a great depression.