Per Fleck on Greenspan on Housing:
The Count of Consistency: He begins speaking about how the ongoing strength in the housing market has "raised concerns about the possible emergence of a bubble in home prices." Now, this is hysterical, having him talk about bubbles and pretending he's an expert. When we had the Nasdaq bubble raging, he professed ignorance of it until after the fact, saying that something would have to collapse by 40% in a short space of time to become a bubble. After that's what the Nasdaq did, he still said there was no bubble. So, he can't tell either when one is occurring or recognize it after the fact.
Anybody Home?: Then he lists several points about why the housing market can't be a bubble. He starts out like this: "However, the analogy often made to the building and bursting of a stock-price bubble is imperfect." Then he goes on to cite the following factors: "substantial transaction costs," "the seller must physically move out," which "often entails emotional costs," resulting in "an obvious impediment to stimulating a bubble through speculative trading in homes." So, I guess we've never had a housing-market bubble in the past, huh, Al? And I guess those impediments also kept the Japanese from having a housing bubble as well!
6 Rms., Bubble View: From there, he proceeds to say that the turnover in home ownership is so low that it stops speculative activity, i.e., there's not enough volume. Then he opines that arbitrage opportunities don't exist, and if there was a bubble in a local market, it couldn't spread. In any case, while spouting all these specious arguments for why housing can't have a bubble, he never ever acknowledges the fact that large bubbles in housing are a function of reckless monetary policy, just as the bubble in stocks was a function of his reckless monetary policy.
He acts as though these events are just self-igniting. His cavalier attitude shows a staggering disregard for what easy money does, which is I guess why he's kept the spigots open forever and never seems to learn anything. I suppose since he admitted in a previous speech that he didn't know how to define money, we shouldn't be surprised by his failure to understand that waaaaay too much of it causes bubbles.
Pillars of Salt: Mark my words, ladies and gentlemen. Before this year is out, when people are forced to give up on the hope of a stock-market rebound and an economic recovery, we'll look back and see these two chieftains, Fisher and Greenspan, for the irresponsible individuals they were. Then at last, blame will be rightfully placed on the architects and babysitters of the biggest speculative mania in the history of the world. |
