September 2006:

Dallas Fed President Richard Fisher: Mr. Chairman, the Eleventh District economy remains strong and continues to grow at a stronger pace than the rest of the country, with employment growth continuing at roughly twice the nation’s pace. Incidentally, home sales have not turned down in our District, so we haven’t been singing yet what we call the “coastal blues” as far as the homebuilding market is concerned. I think that’s enough said about Texas and the Eleventh District.... According to these business contacts, the outlook for economic growth is better than it sounds, whereas the dynamic of inflation is worse than it sounds. Just a few anecdotes here for, if not similitude, verisimilitude. By the way, all the interlocutors are fully aware of the shape of the yield curve—these individuals are sophisticated— and they are especially aware of what is happening in the housing market. As one CEO told me, the only subject that has been more analyzed than the housing situation is the birth of Brad Pitt’s baby. [Laughter] According to this view, if we have not discounted what has been happening in the housing market, we have been living on Mars, and I think that is an important point to take into account

LA TIMES

Greenspan has been helping to inflate the housing market.

December 18, 2003|Dean Baker | Dean Baker is an economist and co-director of the Center for Economic & Policy Research in Washington.

Any assessment of Alan Greenspan's long tenure at the Federal Reserve has to present the stock bubble as his biggest failure. If Greenspan had effectively and consistently warned investors of the irrationality of stock prices in the late 1990s, the bubble never would have reached such dangerous proportions. His "irrational exuberance" comment just wasn't enough.

The collapse of the bubble, which destroyed more than $8 trillion in paper wealth, was the immediate cause of the 2001 recession and the economy's subsequent period of weak growth and failure to create jobs. The collapse also left pension funds unbalanced and forced millions of workers to delay retirement. After his failure regarding the largest financial bubble in the history of the world, it looks like Greenspan is now actively promoting the world's second-biggest bubble: the housing market.

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So Baker got that wrong. It wasn't the second biggest