Predicting the Housing Bubble

Thursday, July 30, 2009
Posted in category Boom-Bubble Phenomenon

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).

- The House that Greenspan Built: Irrationally Exuberant Wall Street Welfare Parasites and Their Fed-God (Sept 12, 2003)

- 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.

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4 Responses to Predicting the Housing Bubble

  1. CPL says:

    July 30th, 2009 at 11:05 am

    It’s amazing that no matter how people assume the junk they bought is worth a fortune (homes, cars, misc crap), it all comes back to what the market understands as reality. So far I’m enjoying hte recession, business is good, house is paid for (just bought it cash), no car loans and the biggest screen in the house is on a laptop (can’t remember last time I bought a tv, I have one, somewhere…I think).

    Ther eis one thing that is missing from the equation of the housing bubble as well, demographics. Large boomer demographic moving out of single family homes into bungalows because the kids are gone and the eventual dying off of the demogrpahic leaving behind double the housing for 35% less population.

  2. Bruce says:

    July 30th, 2009 at 3:28 pm

    Karen, like you I saw this growing balloon in 2003 and 2004. As a real estate investor, I began to see a troubling trend in local prices.

    Basic little houses were suddenly jumping up faster than I had ever seen in 30+ years. Of course, many realtors said, “don’t worry, the market still has room to grow…” oh, if that were only so. :-)

    Typical elite types think only they will know when things get out of hand. In fact, I’ll bet most ordinary citizens who were paying attention took notice as well. …I know I did.

  3. Jean says:

    July 30th, 2009 at 10:09 pm

    Heck, I saw it in 2005 when I bought gold at $300/oz. BTW, this is the same Don Luskin who was at one time an economic advisor to then presidential candidate Ron Paul, and then from out of nowhere, he became an economic advisor to John McCain. I think Mr. Luskin is someone who deservedly needs to be ignored.

  4. clark says:

    July 31st, 2009 at 12:22 am

    thehousingbubbleblog.com
    Created November 2004 – If I’m not mistaken.
    Quite a few people (Online only) were onto it, including yours truly, since 2003 or 2002, I forget when exactly. We could count the number of housing articles at the time each day on one hand and read every one as they came out. We were even bored because there were no articles some days/weeks. I’m just a regular guy, no one special and I saw it coming. I sure did get a lot of flack for saying so at the time. NO Other regular people I knew of saw it coming (I think they thought they were a part of the so-called local elites) they wouldn’t even listen to one word against housing, it wasn’t wHAt the, “experts” were saying so it must be untrue. I think I found LRC by looking for housing articles back then.

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