As I have pointed out, New York Federal Reserve economists, McCarthy and Peach had no clue that the housing market was in a bubble.
Now comes word that Tryggvi Herbertsson, then an economist at the University of Iceland, and Frederic Mishkin, a Columbia professor at the time who would later become a Federal Reserve governor wrote a report in 2006 titled, “Financial Stability in Iceland“. The report states that “Although Iceland’s economy does have imbalances that will eventually be reversed, financial fragility is not high and the likelihood of a financial meltdown is very low.”
My reason behind posting these Irving "Stocks have reached what looks like a permanently high plateau." Fisher type forecasts is to emphasize that Fed members have no special insights into the economy, and it is absurd to think the Fed is going to somehow regulate against economic bubbles, when there is no evidence that they can consistently detect them. Further, the Fed doesn't appear to understand ABCT, which points the finger at the Fed as the main culprit in most bubbles.
In fairness, it is possible that there are so many Fed economists, that there is a wide spectrum of opinion on any topic, and then a cynic like you can cherry pick the bad forecasts after the fact?
ReplyDeleteEven if the above were true, it would still spell doom for the "we need more regulation!" crowd. But I'm wondering if there were "yes virginia there is a housing bubble" Fed papers in 2004, that you haven't seen.
Bob,
ReplyDeleteYou are quite right when you say:
Even if the above were true, it would still spell doom for the 'we need more regulation!'crowd.
However, in my response to McCarthy and Peach, I wasn't cherry picking, after the fact. I responded to them in 2004 at the time they wrote their paper. Indeed, it was sufficiently before the Bubble burst that for, at least, six months after my response that Peach continued to use a quote from my response as a kind of "ha ha" here is a dissenting view, in his power point presentation.
Here's the internet address of the NY Fed:
http://www.newyorkfed.org
Here's the Fed main site:
http://www.federalreserve.gov
I invite you to see if you can find a Fed economist warning that a housing bubble was in the making.
I watch them quite closely and have not spotted any dissenting views in 2004 to 2006 period about a coming housing bubble. NOTE: I am talking about papers from Fed economists-- not speeches by Fed governors and presidents where they are all over the place in any one given speech, so that they are hedged against anything including the world being flat!