Tuesday, February 28, 2012

Taking the Fed Economists Head On

UPDATE at bottom of post.

Senior Vice President Macroeconomic and Monetary Studies Function Federal Reserve Bank of New York Dick Peach has responded to my earlier email:
 You are correct that several national home price indices have declined to 2002/early 2003 levels.  Do you think it is possible that home prices are overshooting to the downside?  
Also, I was wondering what metric you used to conclude that home prices were overvalued in 2004 and 2005. 
Regards
Richard W. Peach

My new response to Mr. Peach:
I didn't use a "metric". That's the key you guys at the Fed, of all places, don't seem to get. I think you fail to understand business cycle theory and your methodology is wrong. 
By the Federal Reserve distorting prices through money printing, it's impossible to know what the non-manipulated housing market would look like.There is no "metric" that can tell you. I just knew that at some point you have to slow money printing for a short period for fear of price inflation, which Mr. Bernanke did in the summer of 2008, which crashed the entire damn thing, which I warned about in real time, hereherehereherehereherehere and here. 
My statements have been bold, but they have been correct. I also am on record as seeing the current turnaround well before most. Here's a December post. I have also been warning about a great price inflation that is developing. In all seriousness, since you guys missed the housing bubble, the Great Recession and the turnaround and I have nailed them all in real time, don't you think it is time to have me over for lunch so I can explain why you guys are about to blow the economy up in a price inflation spiral? Or are you happy with your faulty models and what they will do to the country?

UPDATE: Fed economist Richard Peach has graciously invited me to lunch and to give a seminar at the New York Fed.

29 comments:

  1. Into the belly of the beast. Go RW!

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  2. Awesome! Do you think they'll allow spectators?

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  3. I agree there are no good metrics.

    There might, however, be several metrics that could GENERALLY indicate a bubble in real estate (or anything else for that matter) while not being conclusive - and therefore HIGHLY imperfect.

    What do I mean? Well, here's my thought. It seems to me that prices for anything can only GENERALLY rise (as opposed to rising at a specific location for a short period of time) as a function of monetary policy.

    I view money like water. If I have a set of shot glasses and a pitcher, I can make the levels of water in the glasses rise, some of the glasses rise, or the pitcher rise, by shifting water from one container to another.

    The only way I can make the water rise in all containers is to add water from an outside source.

    At the same time, I know that the population is expanding. And to support them at the previous prevailing standard of living, productivity must rise to some degree.

    I see this as adding more shot-glasses. I would posit that this process could be observed imperfectly through the birth-death model.

    And the relative productivity could be seen - again very imperfectly - through the median or perhaps average income metrics.

    So, if I see something, like the bond market, or the NASDAQ, or the DOW, or the real-estate market displaying GENERALLY rising prices, where the birth-death model would not suggest that the additional housing (or stocks, since it is generally older people who buy them) SHOULD be demanded as heavily as it apparently is... AND I can't see in general incomes that there is a logical connection to the populations' ability to pay for this rising demand... then I could certainly state that this situation would be one strong indicator of a bubble, while itself not being conclusive.

    I would, however, that fame or popularity is fickle. This is well known. So...

    The longer such an indicator stayed 'out-of-whack' the stronger the indicator would be...

    But I agree this would only be an indicator and not a solid metric that could be plugged into an equasion to form a model.

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  4. Holy Sh*t!!!!!! The Rothbardian Austrians going out to dinner with the clowns at the Fed?!!! I can't believe it.

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  5. Awesome to hear this. I am really surprised they were open to having an Austrian give a lecture. If this ends up happening, I would love to see a video/audio recording of this if at all possible. Thanks!

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  7. hahahah

    RW: such a G

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  8. You can lead a horse to water and all that. Robert you gotta understand they have green shoots and a recovery to protect. The status quo and ponzi must continue. Their and their master's wallets demand it and Obama's reelection hinges on it.

    I applaud your effort but we're gonna go off the cliff, it's too late.

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  9. I can't believe it. Talk about balls that clank. God speed Mr. Wenzel and a word of caution:

    "Battle not with monsters, lest ye become a monster, and if you gaze into the abyss, the abyss gazes also into you."

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  10. Seriously? You are invited into the halls of madness?

    Wow. Now thats something, alright. Does that mean that the primary indicator of future federal reserve policy is now EPJ? Thats a lot of power in your hands, RW :)

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  11. I am assuming you did not forget about them laughing at you in their powerpoint presentation?

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  12. Good for you Wenzel, and much thanks from not only myself, but my children and grandchildren as well (for the effort at least).

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  13. This is like Frodo Baggins going in to Mordor.

    You're gonna need a Samwise, RW! Why not ask someone from the Mises Institute who specializes in ABCT?

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  14. A while back I asked the South African Reserve Bank (celebrating their past 90 years of monetary destruction) if they think there's any chance of a denationalisation of money in the next 90. The deputy governor laughed it off, rejecting the idea of denationalised money with a single demeaning sentence. Boy, are they in for a surprise. Thing is: I didn't get the impression Mordor is really open to new ideas undermining its very existence - but man! was the question fun to ask!

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  15. Should I go ahead and sell my gold?

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  16. If he doesn't show...

    GET OUT! IT'S A TRAP!

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  17. Never dine with the devil! At best you come away neutral, at worst they seduce you over to the dark side with power. 'Having lunch with your critics' is one of the oldest methods in the book for keeping your enemies close.

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  18. I can't wait to read your after-action report! Tell them the truth and don't worry about the consequences.

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  19. Kidnap Bob Murphy and make him come with you as a +1, and put a wire on him! It would be one for the history books!

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  20. I think he's kidding.

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  21. "Keep your friends close BUT keep your enemies closer"... and maybe even invite them to lunch?

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    1. That's EXACTLY what I was thinking. Those bozos at the Fed know the deal...they are just doing recon via Wenzel. (no offense Bob)

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  22. After your lunch lecture, please see and count the gold!

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  23. Bring Bob Murphy ... as the ZOMBIE!!!
    http://www.tomwoods.com/blog/interview-with-a-zombie/

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  24. Kindly ask them if they have some kind of audio equipment that you can use during your seminar.

    Their printing press is making an awful lot of noise and it may be difficult to talk without a microphone.

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  25. Don't go---it's a trap! You'll end up like the Knights Templar.

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  26. They will either try and get you to turn to the dark side Gene Callahan style with the promise of money and respect, or they are wanting to see your arguments just so they have a better defense against them because of the low approval rating in the public of the Fed these days.

    It is not a friendly meeting at all.

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  27. Not a chance they are going to think about what RW is going to say. The logical conclusion of Austrian Economics is that Central Bankers and their weapons of Blarney and Inflation are responsible for the economic disaster in this country and the world. And that is not something they want hung around their necks.

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  28. Order hard-boiled eggs: they're hard to poison. :-)

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