- This topic has 9 replies, 7 voices, and was last updated 18 years, 3 months ago by
PerryChase.
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September 13, 2006 at 4:54 PM #7498September 13, 2006 at 5:05 PM #35243
socalarm
ParticipantSeptember 13, 2006 at 7:21 PM #35263davelj
Participant“First, it appears that the housing boom has not been driven by unusually loose monetary policy. This is not to say that monetary policy has not been unusually loose, but that to the extent it has been loose, this is not what has been driving spending on housing.”
Sorry, but it’s hard for me to take anything following the above quote seriously. If you can’t connect the dots and figure that when short-term rates are below inflation (1% vs. some number much greater than 1%) that such loose policy will flow through discount rates and then to malinvestment, then I can’t help you.
In my view, the big three housing boom culprits are:
(1) Too many years of artificially low interest rates via the Fed;
(2) Too much easy credit via lenders (option ARMs, etc.); and
(3) A lack of risk aversion on the part of home buyers and investors, mostly a result of the “Greenspan Put.”I’m sure there are other reasons, but I’d say these are the Big Three.
September 13, 2006 at 7:36 PM #35266sdrealtor
ParticipantAnd I thought it was all my fault;)
September 14, 2006 at 7:40 AM #35297Participanti found it a little hard to believe too. not too sure how they drew those conclusions from the data. i think though, they did stress they didn’t want to analyze ‘price’ in their research
September 14, 2006 at 8:30 AM #35299Wiley
ParticipantI sometimes wonder if there is a concerted effort to keep the general public confused and uneducated. Actually I’m sure there is. Of course loose monetary policy drove housing prices and the fraud that enabled it. Money always goes looking for yield.
I am curious that there is almost no discussion about the carry trade between the billions borrowed from Japan at 0% and lent here. A liquidity drop of historic porportions as I understand it. (also why must I always end my sentences in a preposition?)
September 14, 2006 at 9:43 AM #35305balasr
Participantsdrealtor wrote:
“And I thought it was all my fault;)”
Ok sdrealtor, I modified it as follows. Hope you are happy now :-).
In my view, the big three housing boom culprits are:
(1) sdrealtor
(2) Too many years of artificially low interest rates via the Fed;
(3) Too much easy credit via lenders (option ARMs, etc.); and
(4) A lack of risk aversion on the part of home buyers and investors, mostly a result of the “Greenspan Put.”I’m sure there are other reasons, but I’d say these are the Big Four.
September 14, 2006 at 10:06 AM #35311powayseller
Participantbalasr, that’s funny. Realtors are NOT to blame for any of this. Neither are mortgage lenders, appraisers, inspectors, title officers, buyers, or sellers. Money seeks the highest return. MBS investors, seeking higher yields, are the culprits, and they will be the ones stuck with the bad loans.
BUT, from where did the liquidity come in the first place? Japan took back its liquidity in the second quarter of this year. From where did it all come? Where did MBS investors get their money?
In regard to that article, I cannot believe that our government officials and policy makers would try to mislead us in public. They absolutely know what caused this bubble! They are smarter than I am and have access to much more information. However, we have to take with a grain of salt everything the Fed or policy makers say in public; much of their talks and “research” is aimed at making themselves look good, and in keeping the masses drugged with bad information.
In the next paragraph, please realize I have some of that liquidity stuff wrong, because I don’t fully understand it, so please correct me. But the general idea stands. Back to the report. Can you imagine the fallout if their report stated, “We caused this housing bubble with our loose monetary policy. We lowered interest rates below the rate of inflation hoping to jump-start capital spending, but did not realize we would create a housing bubble instead. To make it worse, the Federal Reserve issued so much debt, and flooded so many dollars into the system, that it was just begging for a place to go. Japan’s zero interest rate policy brought $300 bilion into the US, looking for an investment, and it flowed to MBS, making more and more easy credit available to Americans who had NO business every applying for a mortgage, much less getting one. Now millions of Americans are facing foreclosure, and there isn’t a damn thing we can do to help them. Excesses always cleanse themselves, so good luck with your cleansing. Don’t worry, as we will definitely raise your taxes, so you can do your American patriotic duty in bailout out your fellow GSEs, banks, and bankrupt cities. But don’t blame us, because we want you to like us. Please, will you not be too mad? Please, I just want you to say you still are my friend. Pleeeeaaaaase, will you be my friend???…”
Actually,September 14, 2006 at 11:47 AM #35327ParticipantPowayseller, I wasn’t able to understand from your post whether you realized that I was just joking. Realtors are actually the last group I would blame (inspite of Lie-reah et. al). The fundamental cause was GREED of normal people. Everyone wanted 20% appreciation YOY and were willing to pay for it. As Galbraith says, at the end of every financial mania, finger-pointing starts, but rarely is there the acknowledgement that GREED of the participants is what set the whole thing off in motion. Sure the Fed deserves some blame – for being wrong in their deflationary concerns and keeping rates down too long, but the fundamental cause is still GREED.
September 14, 2006 at 12:11 PM #35337PerryChase
ParticipantPolicy makers keep “the masses drugged with bad information” concerning monetary policy. That makes me wonder about everything else.
Government will never admit to any bad mistakes otherwise it might cause unnecessary panic and dissatisfaction.
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