This Month In Economic History
"I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then, when you look at them more carefully, what they really amount to is a bailout for financial institutions or Wall Street."
-Hank Paulson, February 28, 2008
"The housing market has been very strong for the past few years...Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise, but not at the pace that they had been rising. So we expect the housing market to cool, but not to change very sharply. If the housing market does cool, more or less as expected, that would still be consistent with a strong economy."
-Ben Bernanke, February 15, 2006
"By later this year, housing will stop being such a big drag directly on GDP."
-Ben Bernanke, February 27, 2008
"I expect there will be some failures [of smaller regional banks]. Among the largest banks, the capital ratios remain good and I don’t anticipate any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system."
-Ben Bernanke, February 28, 2008
-Hank Paulson, February 28, 2008
"The housing market has been very strong for the past few years...Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise, but not at the pace that they had been rising. So we expect the housing market to cool, but not to change very sharply. If the housing market does cool, more or less as expected, that would still be consistent with a strong economy."
-Ben Bernanke, February 15, 2006
"By later this year, housing will stop being such a big drag directly on GDP."
-Ben Bernanke, February 27, 2008
"I expect there will be some failures [of smaller regional banks]. Among the largest banks, the capital ratios remain good and I don’t anticipate any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system."
-Ben Bernanke, February 28, 2008
posted by The Cunning Realist at Wednesday, February 24, 2010
7 Comments:
ALOHA !!
"The Global Market is very, uh, broad."
Hank Paulson, G-7 Press briefing, 10.09.08
So, are these guys clueless, or are they blowing smoke? i tend to think it's the latter. But who knows? Maybe they are so deep in the system, they can't take an accurate measure of it.
But back in 2005 I was in the housing market. I shopped around and decided not to buy. The prices were just way too high. I told a friend I thought housing needed to come down 30% to be in line. He thought I was nuts. Now he says, "I bet you're glad you didn't buy that house!" Indeed I am.
So if I, an inexperienced layman, could see that housing was out of whack, what's up with these financial luminaries? If they understand the economy so well, why didn't they see the bubble? Or did they, and they just said what they needed to say to keep the train rolling?
I must be nice to be in a profession where one can be spectacularly wrong and continue to draw a massive paycheck. Or to be in one where as long as you please your peers, it doesn't matter what you say in public.
So my question is: Did anybody who was making market prediction (and possibly responsible for minding the store) realize to what extent the housing market was responding not to demand for housing, but to demand for fixed rate securities?
I read an article in the New Yorker 8 or 9 months ago outlining the activities of Countrywide. This was about money finding people to borrow it, not the other way around.
ALOHA !!
Quite honestly, I stood before my Merrill Lynch broker in October 2006 and told him I was liquidating my entire seven figure brokerage account. Oh yeah ... it was seven figures so it wasn't like I wanted "free checking" so I was moving to Chase! When he asked me why, in shock, I simply told him that I did not trust Merrill Lynch or the entire US financial system any more. He almost laughed, but barely held it in just in case I might change my mind the next day. I never did and have not spoken to him in years. I still do not know whether he is employed at Merrill Lynch or not. I also told my ex-Morgan Stanley broker the same thing. He disagreed with my reasoning as well ... You see these guys are not paid to "manage" your account like you think. They are only paid to "sell" ... They sell you "financial products", usually "their" financial products.
To say nobody knew what was coming is just absolute nonsense. I cannot tell you how many anti-US FED blogs were running open public info on major toxic derivatives and the faulty counterparties behind them. Of course none of this was exposed on CNBC and the FOMC meeting minutes were as dead and lifeless as they are today on that subject. It didn't take a financial and economic MIT professor to figure out that the unGodly profits at Wall Street banks then combined with the insatiable hype of the REAL ESTATE BUBBLE driven by an insane credit market whereby loans were handed out at like hot dogs at a Dodger game, would lead to collapse. Does anyone here recall the "HOUSING BUBBLE ROADSHOW" that was a regular feature on CNBC back then and the numerous other housing bubble reality shows? FLIP THIS HOUSE ... HUGE BANK PROFITS with nothing but AAA out into the distant horizon should have been a clue.
To add insult to injury I cannot tell you how many times I watched a very lonely RON PAUL grill ALAN GREENSPAN on the derivatives market and its lack of regulation. In my book Alan Greenspan needs to apologize to RON PAUL and the American people for his numerous failures and lack of insight into the derivatives markets being run by the likes of Goldman Sachs and AIG. Then he needs to hand his Presidential Medal Of Honor that Bush gave him over to RON PAUL. Then after that Greenspan to check himself into a minimum security prison in Florida for his part in perpetrating the biggest bank fraud in US history. In my World that would be truth and justice.
There is only one explanation as to why nobody at the US FED or the US Treasury wanted to see any of this coming. In one word ... MONOPOLY!
Yup... Hey kilfarsnar.... Everything the feds involve themselves is winds up that way. Feds can't even protect their own defense headquarters building after spendind hundreds of billions of dollars on bombs, spys, foreign governments, etc. Now they spend a trillion dollars a year. Feds start a war on drugs sending the US prison population sky high, destroying civil liberties, militarizing our police force, waging low scale warfare in central and south america... Are drugs any scarcer? We used to have the most educated population in the world with our old one room school houses... Now we have prison style educational facilities and numerous 6 figured administrators... Literacy and graduation rates have plunged. What do all of these things have in common? Only in government does complete and total failure lead to bigger budgets and more power! Why would they ever want to succeed? As Kaimu says... It is the monopoly. If I am unhappy wit my GM product, I can buy a Honda. If i am unhappy with the feds... I give them the shirt off my back and indenture my children's future ti them?
http://www.nytimes.com/2010/02/25/opinion/25brendon.html?pagewanted=2
The new invention of the service economy!!! I pissed my pants when I read that. First there was the industrial revolution...then came the service economy! LMAO. Those stupid Chinese. Look at them getting rich on this past industrial revolution stuff! Don't they know the joys of debt laden "service economy"!
But the differences are palpable. The Roman economy depended on agriculture whereas the United States has an enormous industrial base, producing nearly a quarter of the world’s manufactured goods, and dominates the relatively new invention of the service economy.
The chap is totally right, and there is no skepticism.
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