Predicting the Housing BubbleThursday, July 30, 2009
The first piece that crossed my Mac 13″ laptop this morning was this piece in the Wall Street Journal by Donald Luskin, “Can the Fed Identify Bubbles Before They Happen?” Luskin, a guy who denied that there was a housing bubble right up to the end, writes about William C. Dudley, the ex-Goldman Sachs economist just appointed president of the New York Federal Reserve. Mr. Dudley thinks that the Fed should be given the powers to control asset prices so the government can ward off any future bubbles by using its crystal ball to determine when a bubble arrives, and at what point the Fed should engage regulatory policy to beat back the bubble. Now what interests me about this article is the mention that “the housing bubble in the United States had been identified by many by 2005.” Oops.
Hmmm. I suppose they refer only to the glorified, PhD crackerjack economists in the mainstream media. Look outside of the mainstream media, and we see many who knew this well before it is “officially identified” by very official economists. Many Austrian economists, or even amateur political economists, writers, and bloggers such as myself, were onto this thing long before that. I first started talking about this with my like-minded friends in about 2001. I did a rough search of my blog and came up with many mentions, and I’ll list a few of them below (my blog came into existence in August 2002).
- GDP: Is the Recovery Coming? (October 31, 2003) This is where I first used the term “have pulse, will loan.”
- Recipe for Financial Disaster (Decemeber 25, 2003)
- Best Places to Live. Hogwash! (December 25, 2003) I like this one because I refer to Money Magazine’s awful “best places to live” list which includes mostly places that became popular communities because the price of housing had risen so rapidly. That was the mentality at that time: spiraling prices = desirable trait. Yippee!
- Bush: God of the Economy (June 24, 2004)
- What’s an Investment? (June 6, 2005)
And on and on. Even a little ole part-timer like me had that one figured out well before 2005, Mr. Luskin.