Bernanke Blames For The Housing Bust
From Bennie & The Fed's speech in Barcelona.
The housing boom: During the years from 2000 to 2005 alone, house prices increased by roughly 60%--
far outstripping the increases in incomes and general prices--and single-family home construction increased by about 40%.
The housing bust: Over the past two years, building activity has fallen by more than half and now is well below where it was in 2000.
House prices have shown significant declines in many areas of the country.
Residential construction continues to contract, and the overhang of unsold new homes remains large.
Blame it on Asian savers, not Greenspan lowering too far and keeping it there too long; and deficit spending agencies & politicians...
a substantial increase in the net supply of saving in emerging market economies contributed to both the U.S. housing boom and the broader credit boom.
The pressure of these net savings flows led to lower long-term real interest rates around the world, stimulated asset prices (including house prices),
and pushed current accounts toward deficit in the industrial countries--notably the United States--that received these flows.
Blame it on yield chasing... an increased appetite for risk-taking--a "reaching for yield"--
stimulated some financial innovations and lending practices that proved imprudent or otherwise questionable.
Blame it on poor risk management... the risk-management systems of many financial institutions
proved inadequate in the face of a major housing downturn and substantial disruptions in market liquidity.
Blame it on housing prices being too high... The housing boom came to an end because rising prices made housing increasingly unaffordable.
Blame it on so called AAA ratings... as subprime losses forced the credit rating agencies to downgrade what had been highly rated mortgage-backed securities,
investors also came to doubt the reliability of ratings that had been awarded to other highly complex securities.
On commodities and the dollar... The possibility that commodity prices will continue to rise is an important risk to the inflation forecast.
We continue to carefully monitor developments in foreign exchange markets.
We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations...
ensuring that the dollar remains a strong and stable currency.
The housing boom: During the years from 2000 to 2005 alone, house prices increased by roughly 60%--
far outstripping the increases in incomes and general prices--and single-family home construction increased by about 40%.
The housing bust: Over the past two years, building activity has fallen by more than half and now is well below where it was in 2000.
House prices have shown significant declines in many areas of the country.
Residential construction continues to contract, and the overhang of unsold new homes remains large.
Blame it on Asian savers, not Greenspan lowering too far and keeping it there too long; and deficit spending agencies & politicians...
a substantial increase in the net supply of saving in emerging market economies contributed to both the U.S. housing boom and the broader credit boom.
The pressure of these net savings flows led to lower long-term real interest rates around the world, stimulated asset prices (including house prices),
and pushed current accounts toward deficit in the industrial countries--notably the United States--that received these flows.
Blame it on yield chasing... an increased appetite for risk-taking--a "reaching for yield"--
stimulated some financial innovations and lending practices that proved imprudent or otherwise questionable.
Blame it on poor risk management... the risk-management systems of many financial institutions
proved inadequate in the face of a major housing downturn and substantial disruptions in market liquidity.
Blame it on housing prices being too high... The housing boom came to an end because rising prices made housing increasingly unaffordable.
Blame it on so called AAA ratings... as subprime losses forced the credit rating agencies to downgrade what had been highly rated mortgage-backed securities,
investors also came to doubt the reliability of ratings that had been awarded to other highly complex securities.
On commodities and the dollar... The possibility that commodity prices will continue to rise is an important risk to the inflation forecast.
We continue to carefully monitor developments in foreign exchange markets.
We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations...
ensuring that the dollar remains a strong and stable currency.
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