tag:blogger.com,1999:blog-13164186.post6266763594704753939..comments2024-01-27T19:26:32.604-05:00Comments on Bubble Meter: Harvard and UPenn economists: Credit market policies didn't cause the housing bubbleDavidhttp://www.blogger.com/profile/11169148764438565562noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-13164186.post-73155120151190049492010-05-21T14:45:28.966-04:002010-05-21T14:45:28.966-04:00I think there's a bit too much focus by many p...I think there's a bit too much focus by many posters here on "blame". But when it comes to rational analysis and policy decisions blame, from a moralistic standpoint, is beside the point. If you want to blame foolish buyers (who I believe do hold significant responsibility) or banks or Jesus, fine. But what I care about, and what I think we all should focus on, is how to change the system to prevent another similar bubble and all the collateral damage to the economy as a whole. Its about building an economic and regulatory framework that provides maximum stability, growth and fairness. Blaming is a waste of time and emotion.Anonymoushttps://www.blogger.com/profile/07941397575879054298noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-3917647194400676182010-05-21T14:38:26.871-04:002010-05-21T14:38:26.871-04:00Yeah james, I think we're on the same page on ...Yeah james, I think we're on the same page on this one.Anonymoushttps://www.blogger.com/profile/07941397575879054298noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-82066335454096371972010-05-15T14:42:34.408-04:002010-05-15T14:42:34.408-04:00OK, fine. Easy money didn't cause the bubble,...OK, fine. Easy money didn't cause the bubble, just like guns don't shoot people. If there wasn't an appetite for buying, rates could be zero and a bubble would not happen. <br /><br />But conversely if there was a massive appetite for buying but let's say there were no loans available, surely a bubble wouldn't occur in this case either. <br /><br />So cheap money was not causal, at least not solely. <br /><br />Bubbles require both the will and the ability to buy.<br /><br />So who is to blame? <br /><br />Personally, I believe we have the responsibility to understand what we are doing. If I buy over my head and suffer for it -- my bad.<br /><br />I work in a low income clinic, and I can testify that a good slice of the population can't make decisions at that level. They just see the buying frenzy and rely on the media and equally uninformed friends for advice.<br /><br />These buyers are victims.<br /><br />In any case, the professors shouldn't be out in the real world where they might hurt themselves, and absolutely no one should take them seriously. <br /><br />We have learned nothing, I'm afraid. Before long we'll be back to 'there is no bubble' and it will all start over.<br /><br />Sorry about posting ANON -- can't seem to log in and I didn't want to dump my post to sort things out with Google. I'll do better next time.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-39451612106254399442010-05-10T22:32:23.209-04:002010-05-10T22:32:23.209-04:00The fact that 'typical' or 'traditiona...The fact that 'typical' or 'traditional' or 'fundamental' economic theory doesn't account for all the causes of the bubble would tell me these fellows need to rethink some of their 'typical' and 'traditional' and 'fundamental' theories. Start with mob psychology and the spatial hierarchies of commission sales persons and lenders. Fellow Ivy Dubya would be impressed by their strategery.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-36843824308891113902010-05-10T19:02:18.997-04:002010-05-10T19:02:18.997-04:00I have been attacked by many Bubble Meter readers ...<i>I have been attacked by many Bubble Meter readers for this belief that buyers largely have themselves to blame for the bubble. Despite the fact that bidding wars often broke out during the bubble, in which buyers frequently bid above the asking price of the house, it is far easier for people to lay all the blame on a small group of Wall Street bankers than spread the blame over a large swath of the American public.</i><br /><br />I have argued the same thing on my blog back when I was blogging. <br /><br />Buyers have no one but themselves to blame. But it is easier to blame others after all.<br /><br />MariniteAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-5476047932107263932010-05-08T18:49:35.406-04:002010-05-08T18:49:35.406-04:00The drivel that some economists spout is astoundin...The drivel that some economists spout is astounding. I'm sure they are very bright people. But they do have a financial interest to protect for themselves and their patrons. Unfortunately they discredit themselves and any subsequent opinions they offer should be ignored if not derided.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-16158336842057203432010-05-06T14:03:02.886-04:002010-05-06T14:03:02.886-04:00kahner said...
"I think its obvious that the...kahner said...<br /><i>"I think its obvious that the 'cause' of the bubble was buyers' bubble mentality and greed. But the other factors which the study addresses, in particular lax underwriting standards, were necessary pre-conditions. People will always be greedy, illogical and prone to inflate asset bubbles of one type or another. The key to economic stability is sensible regulation."</i><br /><br />That I agree with. However, I believe that while some of the things being blamed for causing the bubble were actual preconditions, others were co-conditions. Again, I think a feedback loop applies. The worst of the lending occurred near the peak of the bubble, as companies tried more and more inventive (and reckless) ways of satisfying the public's demand for houses at any price.<br /><br />Think of a race between greedy lenders and greedy borrowers. Whenever one got ahead, it motivated the other to run faster.Jameshttps://www.blogger.com/profile/15243567377599238583noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-91340410403037570182010-05-06T12:40:34.568-04:002010-05-06T12:40:34.568-04:00I think its obvious that the "cause" of ...I think its obvious that the "cause" of the bubble was buyers' bubble mentality and greed. But the other factors which the study addresses, in particular lax underwriting standards, were necessary pre-conditions. People will always be greedy, illogical and prone to inflate asset bubbles of one type or another. The key to economic stability is sensible regulation.Anonymoushttps://www.blogger.com/profile/07941397575879054298noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-23427875635564573552010-05-06T09:32:34.770-04:002010-05-06T09:32:34.770-04:00Readers of this site might be interested in severa...Readers of this site might be interested in several pieces written by Mason Gaffney, including "The Great Crash of 2008" at http://www.masongaffney.org/essays/Great_Crash_of_2008.pdf, at "How to Thaw Credit, Now and Forever" at http://www.masongaffney.org/essays/How_to_Thaw_Credit.pdf.<br /><br />And, if preventing the next cycle is of interest, you might be interested in "After the Crash: Designing a Depression-Free Economy." A related interview is at http://www.masongaffney.org/essays/GAffney_interview_in_Canada_Sun_Life_Financial.pdf<br /><br />In 1933, a Chicago (!) PhD student, Homer Hoyt, published his thesis, entitled "100 Years of Land Values in Chicago." It remains relevant today. See http://www.wealthandwant.com/themes/Hoyt.html and http://www.wealthandwant.com/themes/Boom_Bust_Cycles.htmlLVTfanhttps://www.blogger.com/profile/17172522529549663162noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-52877907062212938622010-05-06T09:14:46.059-04:002010-05-06T09:14:46.059-04:00Increasing the supply of buyers by (1) reducing th...Increasing the supply of buyers by (1) reducing the required down payment; (2) making adjustable rate mortgages available and then the norm, with qualification at introductory rates; (3) permitting people who can't or won't document their income to borrow as if they could and did -- all these are bound to drive up prices in the absence of increases of supply of housing. In California, where homeownership rates are among the lowest in the US, Proposition 13's grandfathering of long-time owners in minuscule property taxes also served to reduce the supply of housing in the market; normal ages-and-stages simply do not apply there. (Their overall homeownership is 4th lowest in the US, but their seniors have homeownership rates higher than their counterparts in the remaining 88% of the US!)<br /><br />Also, wealthy buyers/"investors" from other countries, and increasing population tend to drive up the prices.<br /><br />Adding a few more buyers without increasing the supply of housing will produce the bubble effect.<br /><br />Reporting what's going on at the median isn't the important part of the story. Conditions which add a few more first-time buyers to the market increase the down-payments which move-up buyers can make from bubble-created equity on their first houses. And the bubble runup is off and running.<br /><br />I've heard it said that neoclassical economists are rich people's useful idiots. This study appears to provide support to that argument; I look forward to reading the paper itself when they put it online.LVTfanhttps://www.blogger.com/profile/17172522529549663162noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-42373318496997599442010-05-06T09:13:18.451-04:002010-05-06T09:13:18.451-04:00"reduced downpayment requirements did not gre..."reduced downpayment requirements did not greatly contribute to the housing bubble."<br /><br />But reduced downpayments or no downpayments are certainly contributing to the current foreclosure problems.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-64176283981617707662010-05-06T08:33:12.455-04:002010-05-06T08:33:12.455-04:00Given the level of control and manipulation within...Given the level of control and manipulation within the corporate realm of banks (IMF, World Bank, BIS) over all governments worldwide, I am amazed that none of these "professional" analysts have explored the possibility of intentional manipulation for a political goal. The US is home to, afterall, the most corrupt corporate plutocracy in the world due to its level of power. An analyst who doesn't look to the obvious first is a paid-for analyst, IMO.Anonymousnoreply@blogger.com