At a hearing of the Joint Economic Committee in 2004, Paul challenged Greenspan on the conventional wisdom that low interest rates and high consumer spending were good for the economy. By aggressively lowering interest rates, the Fed was "preventing the conventional liquidation and corrections that come in previous recessions," Paul said.
Early on, Paul also challenged the wisdom of using housing as an ATM for consumer spending. "I do not see how we can say we have true wealth without savings that's created artificially by the excitement of easy money and easy credit and artificially rising prices and then people go out and get into further debt."
"People when they become wealthier in paper terms ... do have collateral to borrow and to spend and they do," Greenspan said. "And that indeed has been an important factor in consumer expenditures over the last decade."
"My question is: Is it real collateral? That's the question," Paul said. "I'm afraid we're confusing debt with assets."
