The Fed Doesn't Buy Your Premise

A blast from the Fed's past, I'm sure.

Edmund Andrews via NYT, May 21, 2005:

Alan Greenspan, chairman of the Federal Reserve, suggested on Friday that the red-hot housing market is becoming a little too exuberant for its own good.

"Without calling the overall national issue a bubble, it's pretty clear that it's an unsustainable underlying pattern," Mr. Greenspan told the Economic Club of New York at the Hilton New York hotel in Midtown.

Mr. Greenspan emphasized that he sees no sign of a nationwide housing bubble, but he acknowledged concerns over "froth" in the market and pointed to a big increase in speculation in homes - particularly in second homes. As a result, he said, there are "a lot of local bubbles" around the country.

The comments of the Fed chairman were the closest he has come to acknowledging the possibility that housing prices may be poised for a fall in some parts of the country.

The issue is sensitive for the Federal Reserve, because its policy of keeping interest rates low has helped propel housing prices upward even when the rest of the economy was dragging.

But surely they didn't know how bad it was at the time? They did.

Zimbabwe Ben Bernanke when asked about froth in July of 2005:

"I guess I don't buy your premise... it's a pretty unlikely possibility..."

" can see some types of uh, area-uh, some types of speculation, investors, uh, turning over condos quickly, so those types of things you see in some local areas, um. I'm hopeful, that th, uh, I'm confident in fact that the, uh, bank regulators will-will p-pay close attention to the kinds of loans that are being made, making sure that underwriting, is done right, um. But I-I do think this is mostly a localized problem and not something that's going to affect the national economy."

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Kellen said...

Mhmm... people hate believing in bubbles. They want to think that our economy is really just growing maybe.

What do you think of this whole gold rush right now?

W.C. Varones said...

Gold may or may not be a little ahead of itself, but it's held its value over the centuries while every single paper currency in history has consistently declined.

If you don't have at least 5% - 10% of your assets in gold and silver, you're nuts.