Let's All Blame Greenspan

A lot of believers in the credit bubble theory of exploding house prices lay the blame for current conditions squarely at Greenspan’s feet. While I agree that that Greenspan’s easy money policy of the past 5 years has been the fuel for ever higher asset prices, I’m not ready to accuse him of incompetence and mismanagement the way others currently are. What Greenspan’s most severe critics seemingly tend to forget was how shocked and precarious the economy felt after, 1.) the dot-bomb collapse 2.) September 11th and 3.) the collapse of Enron and Worldcom. At the time, I don’t think that the US economy could have survived a tightening. Granted, in retrospect, some tightening might have been the right course of action, but that is Monday morning quarterbacking on my part and other Fed critics.



“Now, there are several interesting development in the housing markets. In Britain home prices are no longer rising and turnover is down. In Australia, in many markets home prices are already down and in the US, on record home sales in March, stocks of homebuilders failed to make a new high.

Usually if a new high in a physical market is not confirmed by the stocks in the respective sector - that is if there is a divergence in the performance between physical and financial market we call it a non-confirmation.”