Bernanke: There's No Housing Bubble to Go Bust

[NoStateofMind]

The infallible FED, Chairman Ben Bernanke in 2005 believed there was no housing bubble to go bust.

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

Gee, I wonder if he would change his mind now? :laugh:

 

[Slew Foot]

Bernake's an idiot. He night as well change his name to Baghdad Bob, he's just a parrot for the government.

 

[Engineer]

Strong growth in incomes? Really? The two year period before that saw one group, the top 1% of income earners, beat inflation. I guess that's considered strong! :roll:

 

[LegendKiller]

It is amazing how people had the opportunity to corral this problem, but didn't. Instead, they compounded on the problem, by saying everything was great. It was obvious 3 years ago that this housing boom had nothing to do with income and far more to do with credit.

 

[Jhhnn]

He's not an idiot, at all. He's a spokesman for the banking and investment industry, and a very smart guy. He realizes that the only way they'll keep their hides on, and their current laxity of regulation in place is in restoring confidence, whether that's really deserved or not...

Which is really what he's trying to promote... whatever portion of potential homebuyers or securities investors he can convince will soften the coming blows...

As more and more aspects of the industry were deregulated, the Fed was left in what's really an untenable position, attempting to steer the economy using only their limited authority... and what's left of bank regulators' authority. Bankers and investment movers and shakers are very smart, and the law has apparently allowed them to enter into the kind of deals that provide big profits on shaky foundations, at least for awhile... it's called speculation, maybe even manipulative conflict of interest and in the case of some of the more exotic instruments, maybe even a ponzi scheme...

As with Enron and Global Crossing, it'll require more than a little bit of time and effort to dig through the labyrinthine accounting measures employed to determine if any laws were, in fact, actually broken...

http://business.timesonline.co...nce/article3279691.ece

Which is not to say that growth is bad, at all, but when things get too big too fast, then it's probably malignant... Bernanke's protestations not withstanding...

 

[Lemon law]

The more I read of the Alan Greenspan methods, the more I suspect its just more smoke and mirrors air guitar playing. Alan Greenspan got out before the merry go round stopped. Ben may not be so lucky.

 

[NoStateofMind]

Originally posted by: Lemon law
The more I read of the Alan Greenspan methods, the more I suspect its just more smoke and mirrors air guitar playing. Alan Greenspan got out before the merry go round stopped. Ben may not be so lucky.

Anyone with half sense would know that it was during Greenspans tenure was the beginning of the fall. Staving off recession by way of increasing money supply. We needed a recession to set it all straight and now Bernanke is just going to be the patsy. Most Americans won't know it, the government will tell them some shit to keep their eye off of the true reason.

 

[LegendKiller]

Originally posted by: PC Surgeon

Originally posted by: Lemon law
The more I read of the Alan Greenspan methods, the more I suspect its just more smoke and mirrors air guitar playing. Alan Greenspan got out before the merry go round stopped. Ben may not be so lucky.

Anyone with half sense would know that it was during Greenspans tenure was the beginning of the fall. Staving off recession by way of increasing money supply. We needed a recession to set it all straight and now Bernanke is just going to be the patsy. Most Americans won't know it, the government will tell them some shit to keep their eye off of the true reason.

Now there's something we can agree 100% on.

 

[GrGr]

Originally posted by: Jhhnn
He's not an idiot, at all. He's a spokesman for the banking and investment industry, and a very smart guy. He realizes that the only way they'll keep their hides on, and their current laxity of regulation in place is in restoring confidence, whether that's really deserved or not...

Which is really what he's trying to promote... whatever portion of potential homebuyers or securities investors he can convince will soften the coming blows...

As more and more aspects of the industry were deregulated, the Fed was left in what's really an untenable position, attempting to steer the economy using only their limited authority... and what's left of bank regulators' authority. Bankers and investment movers and shakers are very smart, and the law has apparently allowed them to enter into the kind of deals that provide big profits on shaky foundations, at least for awhile... it's called speculation, maybe even manipulative conflict of interest and in the case of some of the more exotic instruments, maybe even a ponzi scheme...

As with Enron and Global Crossing, it'll require more than a little bit of time and effort to dig through the labyrinthine accounting measures employed to determine if any laws were, in fact, actually broken...

http://business.timesonline.co...nce/article3279691.ece

Which is not to say that growth is bad, at all, but when things get too big too fast, then it's probably malignant... Bernanke's protestations not withstanding...

Heh, yup they are confidence men alright.

 

[Jhhnn]

I don't think that characterizing Bernanke as a mere patsy is accurate in the slightest. He's been right in the thick of the Fed's decision making processes for a very long time-

http://www.federalreserve.gov/...ios/board/bernanke.htm

I think he looks pretty smug in the pic- one of those guys who's really, really sure that he's smarter than the rest of us...

 

[brxndxn]

I watched Ron Paul utterly destroy him... and Wall Street cheered Ron Paul.

I showed my mom that video clip on Youtube (she's a financial advisor.. MBA CFP) and she shouted 'no, you're an idiot' when Bernanke tried to say that the low value of the dollar only hurts people that buy everything outside of the US.

Bernanke is a shill for the Bush Administration..

 

[LegendKiller]

Originally posted by: brxndxn
I watched Ron Paul utterly destroy him... and Wall Street cheered Ron Paul.

I showed my mom that video clip on Youtube (she's a financial advisor.. MBA CFP) and she shouted 'no, you're an idiot' when Bernanke tried to say that the low value of the dollar only hurts people that buy everything outside of the US.

Bernanke is a shill for the Bush Administration..

To be honest, it does hurt them more than it hurts us, to a large extent. Considering the only thing we really need here to subsist is oil, which can be brokered from Canada.

 

[rchiu]

Originally posted by: PC Surgeon

Originally posted by: Lemon law
The more I read of the Alan Greenspan methods, the more I suspect its just more smoke and mirrors air guitar playing. Alan Greenspan got out before the merry go round stopped. Ben may not be so lucky.

Anyone with half sense would know that it was during Greenspans tenure was the beginning of the fall. Staving off recession by way of increasing money supply. We needed a recession to set it all straight and now Bernanke is just going to be the patsy. Most Americans won't know it, the government will tell them some shit to keep their eye off of the true reason.

So the Fed is suppose to do nothing when there is a recession? Like in 1929 when there was a credit crunch and they sit there did nothing and we all know what happened after that?

The Fed's responsibility is the stability of the overall economy, it's laughable to blame the chairman and the Fed for the problem in one industry. Since when is Fed suppose to regulate the real estate industry? If the Fed created excessive money supply, there would have been lots of inflation. Can you tell us what is the inflation over Greenspan's tenure?

 

[LegendKiller]

Originally posted by: rchiu

Originally posted by: PC Surgeon

Originally posted by: Lemon law
The more I read of the Alan Greenspan methods, the more I suspect its just more smoke and mirrors air guitar playing. Alan Greenspan got out before the merry go round stopped. Ben may not be so lucky.

Anyone with half sense would know that it was during Greenspans tenure was the beginning of the fall. Staving off recession by way of increasing money supply. We needed a recession to set it all straight and now Bernanke is just going to be the patsy. Most Americans won't know it, the government will tell them some shit to keep their eye off of the true reason.

So the Fed is suppose to do nothing when there is a recession? Like in 1929 when there was a credit crunch and they sit there did nothing and we all know what happened after that?

The Fed's responsibility is the stability of the overall economy, it's laughable to blame the chairman and the Fed for the problem in one industry. Since when is Fed suppose to regulate the real estate industry? If the Fed created excessive money supply, there would have been lots of inflation. Can you tell us what is the inflation over Greenspan's tenure?

There is a lot of debate as to the extent the Fed should play in manipulating the economy. First and foremost, their duty should be to provide liquidity to the banking system, supporting it when liquidity is scarce. Second, a central bank should protect the currency. Finally, it should prevent panics.

However, the biggest thing it has done recently is keep us out of recession. If you grow faster than is naturally "normal", then you need to have either a period of stagnation, or a period of recession to bring your economy back to the "mean". This regression is healthy and shouldn't be avoided.

If you keep your economy growing forever, you can lead to rampant inflation, or other difficulties.

Now, I do not think the Fed could really have prevented the current problems. It wasn't their fault that trillions of dollars flooded from the equity markets to the debt markets, driving long-term rates lower. That isn't to say that they couldn't have used cooling language or raised rates. However, they still had to contend with a tight liquidity situation post 9/11 and a slow-growth economy. If they had raised rates it could have shaken the market and dropped us into a severe recession.

Personally, I think the dollar was too overvalued and should have gone down anyway. The carry-trade kept it too high and flooded our markets with cheap goods, while making our goods too expensive. Now that's reversing, we should see some benefit.

However, the key component in that situation is China. Since their currency is still, more or less, pegged to ours, their goods get cheaper still. But if our economy falters, their economy stops growing, their inflation jacks up, they will have to either revalue their currency, or face peasant revolt.

This isn't a black/white world. I completely disagree with the Fed manipulating the economy for the long-term, since it's shown to be disasterous. The flip side of that is that doing nothing, in this situation, would seize the markets up and cause massive problems, perhaps a liquidity crunch/spiral where we'd never be able to get out of it. I do think they should have tried to cool the debt market in 2004 by raising rates faster. Would it have fixed the housing bubble? No, but it would have tempered it somewhat.

It's easy to judge the Fed in hindsight, or from the sidelines. However, once you look inside the financial markets, it's pretty evident that the markets needed liquidity.

As I have continually pointed out, there are AAA asset backed bonds out there with solid collateral, solid servicer/sellers, very good structures, that are pricing *WAY* over what they should be. There was a 10-year AAA credit card bond that priced at 115 over swaps. That's a *massive* movement from the 5 bps over swaps it would have cost last year.

It's a staggering thing to see and really worries a lot of people. From that perspective I am glad the Fed dropped rates.

As long as CPI (not core) stays moderated, the deflationary pressures of a recession, plus US goods getting cheaper, should create a good situation for this economy to grow pretty quickly out of a recession.

 

[soccerballtux]

The thing I really don't like about the Fed racing after the economy to the detriment of the inflation of our dollar is it feels like a catch-22. You don't want to hold on your money getting 5% interest because our inflation is at 5%; but then again you don't want to invest exactly because now is not the time to be investing. Well, not for me at least, especially because I don't have the time to be in school + playing with stocks.

I would like a housing bubble burst, peaking at ~2010 (how long do these go on usually?) so that right when I get out of school it is the perfect time to buy a house.

See this is some of the hypocrisy I see also that I do not like-- people exclaim that it's "bad for the economy". Bad for who? The people giving us this message. For me a housing recession is good because it means I'll have to spend less to get a house. This is good for the economy, because it means I am saving more that I would have spent on the house; and this saved money I can invest. Recession is good for some, bad for others. Good for me as companies are scrambling to get their farmable engineering work done for less. Bad for the established engineers that are getting laid off to make way for me.

 

[Jaskalas]

Originally posted by: LegendKiller

Originally posted by: PC Surgeon

Originally posted by: Lemon law
The more I read of the Alan Greenspan methods, the more I suspect its just more smoke and mirrors air guitar playing. Alan Greenspan got out before the merry go round stopped. Ben may not be so lucky.

Anyone with half sense would know that it was during Greenspans tenure was the beginning of the fall. Staving off recession by way of increasing money supply. We needed a recession to set it all straight and now Bernanke is just going to be the patsy. Most Americans won't know it, the government will tell them some shit to keep their eye off of the true reason.

Now there's something we can agree 100% on.

Allow me to jump on this bandwagon while it?s still warm.

:thumbsup:

 

[Jaskalas]

Originally posted by: rchiu
So the Fed is suppose to do nothing when there is a recession?

Do not pretend every move they make is instantly a good move. Delaying the recession as they have done has only made the inevitable crunch all that much worse. The writing is on the wall.

It?s happening now and there is nothing they can do about it. It's like the accidental result of fighting forest fires. You do a good job until a hundred years of unnaturally un-burnt fuel is suddenly set ablaze whereby it burns so hot and furious that you lose the town.

 

[StageLeft]

Originally posted by: Slew Foot
Bernake's an idiot. He night as well change his name to Baghdad Bob, he's just a parrot for the government.

I agree. He also said a few days ago that there won't be a recession, despite the fact almost everyone else thinks there will be. The sky falls and he continues to talk up nonsense.

 

[WhipperSnapper]

Originally posted by: Slew Foot
Bernake's an idiot. He night as well change his name to Baghdad Bob, he's just a parrot for the government.

But! He has a stylish beard, no? I have the same beard and I like to joke that it's the Ben Bernanke look.

 

[Dari]

Considering that basic economic theory states that when times are booming government should increase taxes and increase spending when the economy is slowing, wouldn't it be wise to give the levers of taxation to the central bank? They already deal with monetary policy, why not just add (federal) taxation to their portfolio considering politicians are unreliable in that area? IMHO, that should streamline everything because the politicians can blame the Feds for tax problems but always come to them when a crises comes up.

 

[piasabird]

The US Federal Government is not responsible for people's bad business decisions. You are free to succeed or fail. If you make bad business decisions in life, then life is harder. You can still go to foreclosure and start over. It is not the end of the world if you have to admit you dont understand how money works.

 

[Mavtek3100]

Originally posted by: piasabird
The US Federal Government is not responsible for people's bad business decisions. You are free to succeed or fail. If you make bad business decisions in life, then life is harder. You can still go to foreclosure and start over. It is not the end of the world if you have to admit you dont understand how money works.

Well unless you are a big business. Like a bank, an airline, or a car company then you can expect a nice Billion dollar bail out package.

 

[BoberFett]

Originally posted by: Mavtek3100

Originally posted by: piasabird
The US Federal Government is not responsible for people's bad business decisions. You are free to succeed or fail. If you make bad business decisions in life, then life is harder. You can still go to foreclosure and start over. It is not the end of the world if you have to admit you dont understand how money works.

Well unless you are a big business. Like a bank, an airline, or a car company then you can expect a nice Billion dollar bail out package.

Indeed

Sit in your basement and download music? The FBI will break down your door, confiscate your computer, and you will be sued for hundreds of thousands of dollars.

Violate a patent as a part of your business model? Get a billion dollar gift from congress.

Clearly the answer is more government.

 

[umbrella39]

Barnicke?
Barnicke?!

He still owes me money.