Comments on: Greenspan’s Novel Housing Bubble Theory

By: capitalist - socialist

capitalist - socialist — Mon, 17 Sep 2007 04:29:00 +0000

Strange, if that is what Mr Greenspan is trying to say from both the Bloomberg and WSJ reviews.

The fall of Communism as an idealogy did not provide a one time shift in cheap labor as clearly shown between the GDR/UdSSR and PRC. Both are Communist but the economic success of each is respectively contrasting. Then, you have India, a full fledge democracy with lots of labor – but its economic growth of the past 2 decades were no match to PRC. What has that got to do with the failure of Communism?
Sadly, the PRC in adopting Free Market policies are heading the way of Wall Street – the Chinese Stock Markets are many times larger, the Casino than Wall Street is. It will be the the Mother of all Casinos in years to come – why is the US so adamant for the Yuan to go free float ? Your Wall Street Bankers and Funds are already piling up the stakes there as they lick their recent wounds from Wall Street.
Mr Greenspan, alluding to the release of cheap labor is half a truth – the other is the movement of capital which is the the more important truth. With that, the attendant play is no longer if another Michigan or Detriot plant shuts, the Treasury needs only to digitized more money supply into the system, more credit available, Wall Street takes a cut from both ends and never loses a hand.
Losers – Joe and Sally !

By: Cassandra

Cassandra — Mon, 17 Sep 2007 00:29:00 +0000

America blazed the trail in bringing Democracy to “the people”, (though since others have eclipsed our experiment). Again America has cut the path bringing leverage and credit to “the people” (and their pets mind you!) in quantities and on terms previously unknown and unimagined. One must wonder whether this little experiment will end in classical fashion, or whether we are about to witness a credit binge by the ROW following in America’s footsteps. For the sake of the environment and the planet, we should be rooting for the former.

By: Juan

Juan — Sun, 16 Sep 2007 01:24:00 +0000

(last) anon,

It helps to recognize that regulated banking intermediaries, the old banking system, has over the last roughly 15 years been largely displaced by a constellation of non-bank banks, and this on a more than national scale. Accordingly, the Fed has been substantially weakened in fact even if not in belief.

By: Anonymous

Anonymous — Sat, 15 Sep 2007 16:05:00 +0000

Greenspan recapitalized the banking industry twice (92-94 & 02/03), pushing short term rates down so that financial inst. could borrow short and lend long. The bet worked. So, banks especially in 2002 & 2003 were again awash in fresh capital largely from intermediating a steep yield curve in a low volatility environment. The steep yield curve, and relatively low volatility, paved the way for all these “pay later” mortgage loans. Too much capital was chasing yield. He claimed recently on 60 Minutes he didn’t see the extent of the credit risks and wouldn’t have known what tool to employ to limit the irrational lending. Well Mr Free Market could have mandated that loans be underwritten at the fully indexed rate and not the teaser rate as a start. He claimed the Fed just doesn’t have that kind of clout sounds just a bit disingenuous (though I have great sympathies). I think his ideology sometimes collided with the practical aspects of his job and when in doubt, laisse faire ruled the day.

By: Constantine

Constantine — Sat, 15 Sep 2007 15:14:00 +0000

Alan Shrugged.

By: Anonymous

Anonymous — Sat, 15 Sep 2007 12:46:00 +0000

Long time reader, first comment…

I feel that maybe Greenspan was painting with too broad a brush when he said “fall of communism”. Maybe he should have limited himself to just “the increased availability of labour…”.
Further, American’s have always been the worlds biggest consumers….and on the other hand, the Chinese and the Indians being big savers do not consume the goods they produce and these are exported to the US..this increased availability of goods maybe contributed to the deflationary pressures.
It is when the Chinese, Indians etc. start consuming (W.r.t china..as simple as a govt. edict ) that there will be inflation world wide and the $ will be greatly devalued. (Americans now have no manufacturing…now they cannot borrow…so how will they consume ??).

I agree that the above is too simplistic….just that I a Engineer….

Ven

By: Anonymous

Anonymous — Sat, 15 Sep 2007 11:51:00 +0000

I agree the Bloomberg account is less ideological than WSJ's. Still, one wonders when we will observe seemingly intelligent folks ever get past the schizophrenia in such comments as "US wage earners have suffered and consumers have benefited from the one-time shift of millions of workers into the global labor force." It is, of course, true that the top 10% in this nation are 'consumers' whose wages haven't suffered. But, that aside, we must ask, "Who are these wage earners who have suffered and consumers who have benefitted?"

Gosh. They are the same people!!

Now, if the same person sees wages 'suffer' (remain flat or decline or go badly because of job loss, etc); yet, can go to the store and pay less -- how does all that end up?

I guess we'd need to know whether the lost wages were more than offset by the lower prices.

Because if the opposite were true, then the only way the wage suffering but consumer benefitting folks could make do would be to .... to what? Spend all the savings? Borrow???

And if we saw our wage suffering, consumption benefitting masses doing lots of borrowing.... gosh... where would that lead?

By: CrocodileChuck

CrocodileChuck — Sat, 15 Sep 2007 10:49:00 +0000

Yves

Thanks from an avid reader in Sydney-reading your posts has been the best part of the ride since August, '07....we appreciate your logic and wide interests down here in the Antipodes

Please look us up on your next visit and we shall be MOST pleased to shout you a drink

Kind regards

CrocodileChuck