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One of the more debated interpretations of the economic crisis that started in
2007–08 is based on the ‘Taylor rule’ equation, namely the idea that over the period
2002–05 the Fed has implemented a low-interest policy that has led to the housing
bubble and finally to the ‘Great Recession’. This paper shows that the Taylor rule
equation not only rests on the so-called ‘new consensus macroeconomics’, but also
on the neoclassical theory of growth. The various criticisms raised against these
theoretical foundations suggest that interpretations of the Great Recession based
on the Taylor rule equation are building their arguments on shaky theoretical
premises. Furthermore, this paper shows that an equation formally similar but
logically alternative to the Taylor rule can be regarded as the expression of a general
condition of solvency of firms and workers. According to this ‘solvency rule’ the
prevailing outcome of monetary policy decisions is the ‘regulation’ of insolvencies.
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