In July 2005 and in his capacity as head of the president’s council of economic advisors, Ben Bernanke was asked on CNBC if there was a housing bubble. He does not answer by saying bubbles can’t be seen until after they burst. Instead, he says the following:
*Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in housing prices on a nationwide basis, so what I think is more likely is house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it will drive the economy from its full employment path.
Amazingly, Alan Greenspan would eventually completely contradict Greenspan! Here is “Mr. Chairman,” as CNBC lovingly refers to him, discussing the Lehman Brothers failure in October 2013, “We missed the timing badly on September 15th, 2008 [the day Lehman Brothers went bankrupt]. All of us knew there was a bubble.” So which is it Mr. Chairman? Can bubbles be “obvious” or something “everyone knew” to exist before they pop — as you indicate here — or do you have to wait until after they pop to confirm their existence as you said in Jackson Hole?
Here is a link to the Greenspan Video on CNBC in which Greenspan massively contradicted himself.
Vision Improved
Despite those thick, heavy glass, Greenspan’s vision seems to have improved a bit.
Fed Chairs can never see straight. Their job is not to see, but to blow bubbles for the benefit of the banks when the banks get in trouble. That’s something they will never admit.
Bernanke said letting Lehman collapse was his biggest mistake. Ironically, it was the only thing during the crisis he did right.
All Bernanke did was reinforce “too big to fail”.
And here we are again, in an obvious stock market bubble that the Fed cannot see.
The article was republished with permission from Mish Talk.