James Pethokoukis reports on a new paper that argues against the notion that the financial crisis was caused by income inequality. “Using data from a panel of 14 countries for over 120 years,” the authors of the paper write, “we find strong evidence linking credit booms to banking crises, but no evidence that rising income concentration was a significant determinant of credit booms. Narrative evidence on the US experience in the 1920s, and that of other countries in more recent decades, casts further doubt on the role of rising inequality.” One of the explanations they do find evidence for? The Fed did it.
Meanwhile, Patric H. Hendershott and Kevin Villani investigate “What Made the Financial Crisis Systemic?” Bottom line: “Politicians are responsible for both regulatory incompetence and mission- induced laxity.”
(Usual disclaimers apply: links don’t imply full agreement.)