The Economist vs. Raghuram Rajan
A blundering editorial from the best newspaper in the world. For example, this is how it responds to Raghu Rajan’s claim that inequality created the conditions for the financial crisis:
As for the mooted link to the financial crisis, the timing is dodgy: America’s poor fell behind in the 1980s, the credit bubble took off two decades later.
Factually, this is not true. Leverage of American households rises quite quickly all throughout the eighties and nineties, suggesting that the credit bubble was taking off there and then (see below), though it would increase speed in the 2000s.
But sillier is the assumption that an economic problem had to be solved politically in the decade it came about. There is absolutely no reason to assume this. In fact, political systems often take decades to recognize economic problems. Rajan says it best here.
