Friday, July 09, 2010

Alan Greenspan on the economy

Video: Former Fed Chairman Alan Greenspan on the economy, stocks, the financial sector, and housing.

You can count me as one of the people who blame him for the current economic mess, but I still think he's very knowledgeable about the economy. His book, The Age of Turbulence, is excellent.


  1. MRIS stats out. NoVa is up...again... +10.9% for the year...

    Please, for the love of God. Make it stop... MAKE IT STOP!!!

  2. He is a very knowledgeable man. While I do agree his artificially low interest rates helped contribute to the overall mess in 2008, he otherwise has good advice in regards to the economy because of his extended knowledge on how our economy functions.

  3. One could take all of Greenspan's utterances over the years, bind them together in a book, and title it "The Age of Flatulence".

  4. Greenspan should not have kept short term rates as low for as long as he did. Especially when he admits he lost control of the long end of the curve.

    The DC market is still over priced and I think a correction is coming. The tax credit just artficially boosted demand and kept prices high.

    The low interest rates are better for Sellers than Buyers. Simply becuase you can borrow more at lower rates with income levels the same.

    Real Estate Agents should no longer use the phrase Location, Location, Location. It should be Price and Location.

  5. Tax Credit? Here's an excerpt from Bloomberg worth reading.

    The first-time homebuyer tax credit was created as part of the Housing and Economic Recovery Act of 2008, which was signed by President George W. Bush on July 30 of that year. It offered a credit of 10 percent of the sale price, or as much as $7,500, and applied to homes purchased between April 8, 2008, and July 1, 2009.

    Credit Extension

    The Obama administration expanded and extended the program as part of the American Recovery and Reinvestment Act in February 2009. This legislation extended the credit through Dec. 1, 2009, and increased the credit amount to $8,000.

    Last November, with the expiration looming, Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009. This extended the first-time homebuyer credit through April 2010, and included a credit of $6,500 for current homeowners who purchase a house between Nov. 7, 2009, and April 30. This act also raised the income limits for qualifying for the credit.

    A look at new home sales suggests that the credit didn’t have the intended effect of stimulating a resurgence in the housing market. New home sales, which fuel the construction that can drive gross domestic product growth, failed to rise above the level of 477,000 that they posted in the month that the credit was first passed. It is probably the case that sales would have dropped more without the credit, but a large share of the credits were almost certainly claimed by people who were going to buy a house anyway.

    But since the other parts of the stimulus didn’t work very well either, there were few people willing to buy a home for any reason.

    Signs of Fraud

    The credit did, however, waste an enormous amount of your tax dollars.

    Last October, I wrote a column in this space discussing the rampant fraud that has been a hallmark of the homebuyer tax- credit program. The problem was the Obama administration decided that the money had to be spent as fast as possible, so it provided the credit to anyone who said they deserved it without requiring that the recipient provide the documentation to support that claim. That led to the credit being awarded to 19,300 people who, upon review, didn’t buy a home. Among those receiving the credit were 580 children younger than 18, including a 4-year-old toddler, below the age of legal homeownership.

    Although the Internal Revenue Service has increased enforcement efforts since that time, a recent report reveals that fraud is still a significant problem for the program.

    Room for Inmates

    An updated audit report shows that even after increased enforcement efforts were made, about 2,700 people defrauded the government by claiming a credit for homes purchased before April 9, 2008. In the more recent round of fraud, 1,295 prisoners claimed to have purchased a house while incarcerated (including 241 on life sentences). Most disturbingly, IRS employees themselves played the game, with 87 fraudulently claiming the credit in 2009 and 2010. Altogether, the total cost to taxpayers of legitimate and fraudulent credits exceeded $30 billion.

    So the housing stimulus didn’t stimulate much, added billions of dollars to our bloated deficit, and wasted tax dollars.

    What is worse is what happens now. While some of the plunge in new home sales is attributable to the shifting of sales into April, another part of the drop is related to the expectation of future policy. In particular, a home buyer in July should rationally postpone a home purchase for now, since Congress will almost surely reintroduce the credit some time soon.

  6. Yes officer! That's the man who wrecked my economy!