The Child of The Mother of All Bubbles
by James Quinn
Fri, 24 Sep 2010
There is no doubt the home price bubble inflated by Alan Greenspan between 2000 and 2006 was the Mother of All Bubbles. Robert Shiller clearly showed that home prices were two standard deviations above expectations. Despite the unequivocal facts that Dr. Shiller put forth, millions of delusional unsuspecting dupes bought houses at the top of the market. These were the greater fools. They actually believed the drivel being spewed forth by the knuckleheaded anchors on CNBC. They actually believed the propaganda being preached by David Lereah from the National Association of Realtors (Always the Best Time to Buy) about home prices never dropping. They actually believed Bennie Bernanke when he said:
“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” – 7/1/2005
“Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.” – 2/15/2006
Bennie actually made these statements when the chart below showed home prices at their absolute peak. You should keep this in mind whenever this rocket scientist opens his mouth about anything. And always remember that he is a self proclaimed “expert” on the Great Depression. That should come in handy in the next few years, just like his brilliant analysis of the strong housing market.