Froth You Shouldn't Drink

Brad DeLong, Mark Thoma and others have already commented on these comments by Greenspan.

Greenspan doesn't see a national housing bubble - May. 20, 2005: "WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan said Friday the booming U.S. housing sector shows signs of some 'froth' but that the central bank does not see a national housing bubble. "

Greenspan knows that if he says bubble then, pfffssssssssssssssssssssst, the air goes out. So he says froth. But just as lots of little housing market bubbles do not a bubble make, so too lots of little stock bubbles did not a bubble make in the stock market. And we know how that turned out.

The markets unfailing confidence in this guy, who is nothing but a confidence man, ins unbelieveable. He mismanaged the stock market bubble. He drove the economy into recession in 2001 with his fiscal policies in 2000. He convinced Clinton and Reagan to raise taxes to balance the budget and to build up a Social Security surplus and then advocated for the Bush tax cuts that eliminated the budget surplus and made more problematic the government's obligations to the Social Security surplus. Then, he pulled the old bait and switch and said what is needed are benefit cuts.

I think that SanityPrompt contributor SEPTIMIUS says it best:

1) Out of fear Greenspan said today that prices nationally are unsustainable and there are several local bubbles
2) CNBC has a special on using your 401k to purchase houses
3) 25%!!!!!!!!!! of all houses bought in 2004 were for investment purposes. (This is an enormous amount of phantom DEMAND)
4) Tuesday night the McNeill Lehrer show had a special on newly rich twenty something house flippers.
5) A few weeks ago motivational speaker Anthony Robbins and Donald Trump are selling out auditoriums discussing how to make riches flipping houses…..
6) several hedge funds just covered their shorts on the housing stocks

NATIONALLY 25% OF ALL HOUSES BOUGHT IN 2004 WERE FOR INVESTMENT PURPOSES!!!!!!!!!!!!!!!!!!

WHAT IS THIS NUMBER IN THE BUBBLE AREAS?

AND DON’T FORGET THE MOST IMPORTANT STATISTIC…I JUST BOUGHT MY HOUSE…. CAN YOU SAY “POP”!!!!!!!!!!!!!!!!!!!