Posted on 06/02/2017 4:07:41 PM PDT by Lorianne
Here are some visual aids to help the Fed spot the housing bubble. ___ Minneapolis Fed President Neel Kashkari was the latest Fed official to claim in an essay thus following in the time-honored footsteps of former Fed Chair Ben Bernanke that spotting bubbles is hard, that the Fed cannot see them, and that if it could see them, it shouldnt do anything to stop them because it had only limited policy tools, and because the costs of making policy mistakes can be very high.
But its OK to use these limited policy tools to inflate the greatest bubbles the world has ever seen and then preside over the damage they cause to the real economy before they even implode.
Neither Kashkari nor anyone else working at the Treasury Department in 2006 when they were tasked by Secretary of the Treasury Hank Paulson to look for signs of trouble because they were due for some form of crisis, as he writes could see any bubbles, not even the housing bubble although it was already beginning to deflate.
It is really hard to spot bubbles with any confidence before they burst, Kashkari writes, specifically naming stock prices and house prices. Everyone can recognize a bubble after it bursts, and then many people convince themselves that they saw it on the way up.
So here are some visual aids I put together for Kashkari and other Fed governors. It will help them spot the beautiful housing bubbles in the US because bubbles really arent hard to recognize before they burst, if you want to recognize them.
Whats hard to predict accurately is when theyll burst.
The S&P CoreLogic Case-Shiller National Home Price Index for March was released today. It jumped 7.7% year-over-year, far outpacing growth in household incomes. This has been the case for years. In fact, real household incomes are almost back where they were in 2006 (/sarc). So what could go wrong?
At 198.26, the index surpassed the peak of Housing Bubble 1 in May 2006 by 11% (data via FRED, St. Louis Fed):
SNIP
The folks who floated the entire 0bama presidency to the tune of $85 Billion a month? Those folks? Anyone believe ANYTHING they say anymore?
But is now very hard to get a mortgage, and many people who seem qualified are turned down.
You would think, under these circumstances, that prices would not be going up.
And repossessions are starting to skyrocket again
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