Alan Greenspan traces housing bubble to collapse of the Soviet Union

The Globe and Mail ^ | 03/18/10 | Kristina Cooke

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Alan Greenspan traces housing bubble to collapse of the Soviet Union

Fall of USSR pushed hundreds of millions of workers into global market, fueling savings glut that drove down rates, former Fed chairman says

Kristina Cooke

New York —

Reuters Published on Thursday, Mar. 18, 2010 1:30PM EDT

Last updated on Thursday, Mar. 18, 2010 6:53PM EDT

Former Federal Reserve Chairman Alan Greenspan, whose legacy has been tarnished by the global financial crisis, on Thursday laid out a scholarly defense of why Fed policy did not fuel the housing bubble.

Mr. Greenspan did offer somewhat of a mea culpa, though, noting that the regulatory system failed by not demanding financial firms hold much larger capital buffers.

Mr. Greenspan, who led the U.S. central bank from 1987 to 2006, has been criticized by some analysts who argue he kept short-term, benchmark interest rates too low for too long in the early 2000s.

The former Fed chief defended the central bank's actions, saying that the seeds of the housing boom were sown by geopolitical events that were out of the Fed's control, an argument he has presented a number of times in the past.

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P!

[parsifal]

Oh, this is some BS. Greenspan oughtta just fess up. It’s really Ayn Rand’s fault if you think about it.

parsy, who can’t wait for the comments

[shibumi]

So ..... It’s Reagan’s fault?

[lmr]

Greenspan is delusional. He needs to be fitted with a straightjacket and thrown into the same rubber room with Ron Paul. We could sell Pay-Per-View for a melee. They could bite each others faces off...

[dennisw]

Greenspan is a senile old Ayn Rand style hippie.
What a crap weasel..... So the Fed could not raise interest rates? Fire them all if they are so useless. Super low interest rates sometimes don’t help like right now. But jacking up interest rates will burst a bubble or a real estate mania

[David Isaac]

I had heard that the catastrophic rise in energy costs were the reasing for the burst housing bubble, along with several other bubbles like small retail businesses. Nost here know that energy is an American asset that will not be used, rather than a liability.

[Dahoser]

So ..... It’s Reagan’s fault?

Yeah, you'd have to say that if you agreed with Mr. Andrea Mitchell. On the other hand, since the left refuse to credit Uncle Ronnie with the demise of the Soviet Union, the blame for the housing crisis would fall squarely on the person who the left do credit with the fall of the Soviets—one Mikhail Sergeyevich Gorbachev. Ooh, that's gonna leave a mark.

Meanwhile in the real world, will Greenspan just go away, already? We've had more than enough of Señor Irrational Exuberance.

[Jimmy Valentine]

Now he’s raving, the senile old drooler.

[RegulatorCountry]

If he wants to find an external factor to blame his idiocy upon, he should at least shoot for the plausible: China, with the wage and price pressure that came with it.

But, that’s striking too close to home, and eventually the finger would point right back to him again.

[jiggyboy]

At this point he's not even trying to be convincing. Any reasonable attempt to grasp at straws would be to point to the 1996 tax change that changed the capital gains tax on a house sale from rollover to $250,000 tax-free after two years. 1998 corresponds perfectly to a significant change in the slope of the median house price in the U.S. as the first flippers figured out the game.

[parsifal]

I agree. The tax breaks were a good possible starting point. Here’s another one I get just from having lived a while. When the interest rates began to fall, a house that had a $700/month house note, could be bought for say $500/month. But sellers were selling based on what the payments had been which were $700, so you got a price bump based not on the value of the house, but the perceived ability of a buyer to pay.

That, and the constant influx of money needing something “safe” to invest in.

parsy, who feels sorry for Greenspan (and us) that he isn’t owning his part of the problem

[parsifal]

Oh, and Karl Denniger is lambasting Greenspan, too.

http://market-ticker.denninger.net/archives/2101-Jackassery-Patrol-Greenspan.html

parsy

[LomanBill]

Hmmm.... was  it the collapse of the Soviet Union that invented this policy:

 

"...fraud, you probably think there should be rules against it, I think the market will figure it out."

--Alan "The Wizard" Greenspan

 

??

Hos 12:7-9
7 The merchant uses dishonest scales;he loves to defraud.
8 Ephraim boasts,"I am very rich; I have become wealthy.With all my wealth they will not find in meany iniquity or sin."

9 "I am the Lord your God,[who brought you] out of Egypt; I will make you live in tents again,
as in the days of your appointed feasts.
NIV