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Fed's Plosser Admits Fed Was Responsible For Last Housing Bubble, Doesn't Want To "Create Another"

Tyler Durden's picture


The "mutinying" half of the Fed - that which the FOMC minutes indicated wanted an end to QE by the end of 2013 - is not going to take Bernanke's Wednesday steamrolling lying down. Enter Charles Plosser, who becomes a voting member next year:


Good luck there. But here is the punchline:


Finally, someone from the Fed admits it was Greenspan's and Bernanke's ruinous cheap money policies that created the last housing bubble. As for preventing another housing "boom" or bubble as it is popularly known, we have two words: too late.


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Fri, 07/12/2013 - 12:04 | 3745452 nope-1004
nope-1004's picture



"Although house prices are rising, I don't see any evidence of a bubble."

- Bernocchio, 2006


Fri, 07/12/2013 - 12:05 | 3745463 Pladizow
Pladizow's picture

Every day there's a contradictory comment - I'm convinced the Fed's job is to confuse the market, so that it wont see the rape thats coming

Fri, 07/12/2013 - 12:12 | 3745505 doomandbloom
doomandbloom's picture

Damn...I was about to put on offer on that SAC guys apartment ....should i wait?

Fri, 07/12/2013 - 12:15 | 3745521 Obchelli
Obchelli's picture

Are you SACed in? be careful Stevie might be asking more then house is worth...

Fri, 07/12/2013 - 12:46 | 3745663 socalbeach
socalbeach's picture

One day it's bullish QE comments, the next it's bearish.  Am I the only one who suspects the Fed is giving banks advance notice, and is just jacking the markets around so as to increase banks' trading profits?

Fri, 07/12/2013 - 13:12 | 3745803 FL_Conservative
FL_Conservative's picture

How about equity and debt "booms", fucking Fed morons? 

Fri, 07/12/2013 - 13:29 | 3745862 eatthebanksters
eatthebanksters's picture

Fannie Mae and Freddie Mac are fine and healthy - Barney Frank summer of 2007.  As a result of that statment millions of people lost trillions of fucking dollars.  The guy ought to be the first one lined up in front of a firing squad.

Fri, 07/12/2013 - 13:54 | 3745945 James_Cole
James_Cole's picture

As a result of that statment millions of people lost trillions of fucking dollars. 

Oh, is that what people tell themselves lol

Fri, 07/12/2013 - 15:53 | 3746348 franzpick
franzpick's picture

The ostensible fed member countertalk isn't designed to confuse, but rather to convey the impression that these reasonable men/women have a range of reasonable options to discuss and pursue, and that they have wide and safe operating room in which to manuever.

Assuring us they won't recreate a housing bubble, while no one sees the bubble-shaped 900 pound equity and bond gorilla hiding in plain sight right here in the financial room, is as devious and misleading as big government gets.

They have no choices, they're up against the wall, and Bernocchio's disastrous taper-caper trial balloon leading immediately to the biggest credit event since Lehman '08 proves their dead-end location at the corner of Rock St. and Hard Place.

Fri, 07/12/2013 - 12:48 | 3745673 mickeyman
mickeyman's picture

Everyone knows there was no bubble--only "froth" in selected markets. Bernanke himself said so.

edited - sorry, it was Greenspan

Fri, 07/12/2013 - 13:04 | 3745756 Stoploss
Stoploss's picture

I'll be at the gun shop if anybody needs me..

Fri, 07/12/2013 - 13:43 | 3745915 Staplegun
Staplegun's picture

Just got SS109 projectiles for my latest handload batch. I hear the green tips match nicely with blue helmets. 

Fri, 07/12/2013 - 14:16 | 3745996 HowardBeale
HowardBeale's picture

Save yourself the trip. I just bought everything.

Fri, 07/12/2013 - 12:14 | 3745511 Bay of Pigs
Bay of Pigs's picture

"rape that's coming"

What have we had so far? LOL.

Fri, 07/12/2013 - 12:22 | 3745560 Winston Churchill
Winston Churchill's picture


Fri, 07/12/2013 - 12:44 | 3745654 TheFourthStooge-ing
TheFourthStooge-ing's picture

...and fore(x)play.

Fri, 07/12/2013 - 12:22 | 3745561 MachoMan
MachoMan's picture

just the tip and a bit of tickling

Fri, 07/12/2013 - 15:39 | 3746289 zjxn06
zjxn06's picture

Good cop. Bad Cop.  No matter which cop is telling the truth, a smart criminal knows he's screwed either way.

Fri, 07/12/2013 - 12:07 | 3745474 azzhatter
azzhatter's picture

Leave the fucking market alone you pencil dick geeks.

Fri, 07/12/2013 - 12:32 | 3745530 derek_vineyard
derek_vineyard's picture

no need for 20% down and proof of solid income stream wasn't the culprit?

or was it stock market gone wild wealth effect?

wasn't the previous bubble pre-QE? 

they just want all other assets to boom----not housing?  (we already knew this)

Fri, 07/12/2013 - 12:14 | 3745513 slaughterer
slaughterer's picture

Bullard, I mean Bulltard to the rescue in less than 1 hour.  Another Fed Ping Pong day.   Kev' mumbling after third Red Bull: Must close Green.  Green Bull.

Fri, 07/12/2013 - 12:32 | 3745542 Dingleberry
Dingleberry's picture

Hey bitchez,

We don' use "bubbles" as a term when describing exploding house prices anymore.

We use "frothy" now.

Get it straight.

--Greenspanio, 2005

Fri, 07/12/2013 - 12:38 | 3745618 DRT RD
DRT RD's picture





  Synonyms foamy - yeasty - spumy - spumous - scummy - barmy   or if you like bub·ble     Synonyms noun.   blister - vesicle - bleb verb.  

effervesce - boil - gurgle - seethe




Not far off, uh? Particularily, I was looking at synonyms. Blister, yeasty, boil, scummy.


Fri, 07/12/2013 - 14:02 | 3745959 DosZap
DosZap's picture

Finally, someone from the Fed admits it was Greenspan's and Bernanke's ruinous cheap money policies that created the last housing bubble. As for preventing another housing "boom" or bubble as it is popularly known, we have two words: too late.


IMHO the housing bubble was created by the Democratic party, and Bill Clinton,when they decided that EVERYONE who wants a house should be able to get one.SO, everyone and their dog was allowed to QUALIFY for a new home whether they could even remotely afford it or not, the old standby house pmts/and utilities not exceeding 25% of income was thrown OUT the window, and the NO move in costs, and financed by LAW or the Banks were penalized(esp if it was a minority).It mattered not if you cound not even spell FICO, or not, or what the credit history looked like for millions.

Fri, 07/12/2013 - 12:04 | 3745454 francis_sawyer
francis_sawyer's picture

Confess your sins to a rabbi... Don't come crying to me...

Fri, 07/12/2013 - 12:04 | 3745456 Concentrated po...
Concentrated power has always been the enemy of liberty.'s picture


Fri, 07/12/2013 - 12:04 | 3745458 BalanceOrBust
BalanceOrBust's picture

The problem with rising house prices is that it bails out homeowners and average joes.  The Fed's itnention is only to bail out banks and put feed in their trough.

Low interest rates unfortunately help the home owner. 


how can this be fixed?

Fri, 07/12/2013 - 12:15 | 3745520 machineh
machineh's picture

By ramping stocks to concentrate the help where it's needed -- on institutions and hedge funds. /sarc

Fri, 07/12/2013 - 12:19 | 3745546 adr
adr's picture

Rising home prices and rates screw over homeowners that aren't underwater because there are fewer people who can buy. Which leads to cuts in asking price. The actual housing market is horrendous. If you take away the investors hoping for the greater fool theory it is almost impossible to sell a home without losing money. Which is why there are fifteen vacant homes within a few blocks of my house, with more added every week.

It may bail out a homeowner lucky enough to be in a hot market, but 90% of the real market is still down from even a year ago.

The paper claims home values in my town have increased 4% in the past year. Perhaps based on the average that included all the foreclosure sales, since foreclosures have essentially stopped, there aren't many $20k homes being sold off to flippers. Real homes with owners who are current on their payments have seen values drop at least 15% since August of last year.

Homes that were listed for $145k last year are now listed for $120k. My home appraised for $138k two years ago and my neighbor just sold for $106k. Instead of selling, people are just walking away. If I sell my house now I am out at least $10k, maybe more. I'm not handing the bank $10k or more to get out of my house.

There are two markets, the wealthy market and everything else. If you can afford to buy in the wealthy market, you were probably already wealthy. Your gains are from others transferring Bernanke generated stock market wealth, into the real estate market. The average Joe market doesn't see this pump and dump effect, so it must ride on affordability based on wages. Wages have been taking a nosedive, so home prices have gone along with it.

Fri, 07/12/2013 - 12:34 | 3745611 MachoMan
MachoMan's picture

If you take away the investors hoping for the greater fool theory it is almost impossible to sell a home without losing money.

This is the way it's supposed to be...  the house is a depreciable asset and loses value over time due to use.  The question is not whether you lose money on the deal, but whether home ownership costs more than renting an equivalent house.  You can have to pony up money at closing and still be ahead of renting...

The problem is that people don't have rainy day funds for when the deficiency comes due...  they have the expectation of perpetual appreciation and, thus, begin spending money they will never see.     

Fri, 07/12/2013 - 12:46 | 3745665 Lord Blankcheck
Lord Blankcheck's picture

Perpetual property taxes don't help the bottom line either.

Fri, 07/12/2013 - 14:21 | 3746015 HowardBeale
HowardBeale's picture

Property = myth of ownership

Fri, 07/12/2013 - 12:46 | 3745662 Cheeseus Sonofdog
Cheeseus Sonofdog's picture

It bails out deadbeats. The responsible among us would rather have affordable homes with low property taxes. 

Fri, 07/12/2013 - 15:54 | 3746233 Blankenstein
Blankenstein's picture


"The problem with rising house prices is that it bails out homeowners and average joes"


This is so backwards, it sounds like it comes straight out of the NAR handbook.  Rising housing prices caused the last housing crisis.   The prices no longer were based on sound fundamentals, they were based on fanatasies of future home price gains to pay mortgages.  And the herd of buyers would say they were making an investment.  What was their plan?  Buy high, sell low?   HIgh prices also hurt buyers by requiring more or their income to pay as well as increasing the home valuation for property taxes.

Fri, 07/12/2013 - 12:04 | 3745460 LetThemEatRand
LetThemEatRand's picture

I hope he doesn't own a Mercedes.  They go real fast and explode on contact, or so I hear.

Fri, 07/12/2013 - 12:07 | 3745475 Cursive
Cursive's picture


He'll be re-assigned to study BOJ QE policies in the the Fukashima prefecture.

Fri, 07/12/2013 - 12:11 | 3745496 the black arrow
the black arrow's picture

Do not taunt happy fun ball, happy fun ball may explode at any time

Fri, 07/12/2013 - 12:51 | 3745686 Meat Hammer
Meat Hammer's picture

Merecedes Benz Pinto

Fri, 07/12/2013 - 14:23 | 3746026 HowardBeale
HowardBeale's picture

And the motors are so expensive, they self-eject before the explosion...

Fri, 07/12/2013 - 12:05 | 3745464 Cursive
Cursive's picture

Let's see how he votes next year.  Lots of talking, but these hawks need to walk the walk.

Fri, 07/12/2013 - 12:06 | 3745468 NoDebt
NoDebt's picture

I again beseech and beg the all-knowing Wizard Bernank to continue blowing housing bubbles until I get Mom's old house sold.  Then you can tank the market, if you like. 


Fri, 07/12/2013 - 12:07 | 3745469 PaperBear
PaperBear's picture

The non-federal non-reserve has been creating bubbles for 100 years and only a very few people have any idea what awaits the world when the non-federal non-reserve loses control.

Fri, 07/12/2013 - 12:06 | 3745470 random shots
random shots's picture

More jawboning.  Notice he did not say Fed should increase rates. 

Fri, 07/12/2013 - 12:11 | 3745476 Joebloinvestor
Joebloinvestor's picture

Yeah these MF's come out of the woodwork now.

Full on chickenshit declaration of an obvious fact.

Fri, 07/12/2013 - 12:07 | 3745478 Inthemix96
Inthemix96's picture

Bit late now you daft cunt.

Nevermind, its just us stupid fuckers who live with their 'Insightful' legacies.

You're another one for the chopping block you cunt.

Fucking 'Plosser'?  You taking the fucking piss?  Tosser more like.  And by the way, my surname is 'WankShaft'.


Fri, 07/12/2013 - 12:08 | 3745479 azengrcat
azengrcat's picture

Free... Markets?  That is un-American, I demand the NSA search his computer!

Fri, 07/12/2013 - 12:09 | 3745484 surf0766
surf0766's picture

Late again..

Fri, 07/12/2013 - 12:09 | 3745485 overmedicatedun...
overmedicatedundersexed's picture

of course GSE's and congress had absolutely nothing to do with it, they just wrote the damn regs for no doc loans..hate the fed for what it is (bank crime central) but pal .gov is in it up to barney frank's ball sack.

Fri, 07/12/2013 - 12:10 | 3745489 chunkylover42
chunkylover42's picture

eh, I think you're reading to hard between the lines here Tyler.  One can interpret Plosser's statement in such a way that "another" housing boom does not necessarily imply that they created the first.  It just acknowledges that another housing bubble took place.  Maybe there's more to the comments that I'm not seeing.

I would be surprised if anyone at .gov or .fed ever admitted or took responsibility for anything bad that happened.  It's just not in their DNA.

Fri, 07/12/2013 - 12:10 | 3745490 PaperBear
PaperBear's picture

What the hell is the 10 year U.S. treasury bond doing ? It's been drifting lower all day and now it's shot up from 2.52% to 2.59%

Fri, 07/12/2013 - 12:13 | 3745504 derek_vineyard
derek_vineyard's picture

someone or many someone's have been dumping for an hour or so

Fri, 07/12/2013 - 12:11 | 3745494 Freewheelin Franklin
Freewheelin Franklin's picture

Nobody listens to Plosser. He makes too much sense.

Fri, 07/12/2013 - 12:11 | 3745499 NoDebt
NoDebt's picture

Message to Steve Liesman: 

Rremember your anti-ZH rant where you said that selling bonds to the Fed only served to increase banks capital reserves that just sit there and do nothing (i.e. are not put into the market and therefore don't affect asset prices)?

You were wrong.

Playground rules- your own guy said so.  

So, eat it, you half-baked wanna-be 'economist'!  And yeah, I know you're reading this.

Fri, 07/12/2013 - 12:14 | 3745514 digitlman
digitlman's picture


Fri, 07/12/2013 - 14:57 | 3746142 BalanceOrBust
BalanceOrBust's picture

I remember that theory of Liesman's well.  At the time, I remember thinking that it sounded like he was talking from talking points prepared for him by Treasury or the Fed itself.

What he said was strictly speaking true.  The electronically printed money did start as bank reserves.  But had they stayed as bank reserves, there would have been no effect (except to make the banks feel richer).

Unfortunately, once the banks felt richer, they replaced those dollar reserves with other degraded reserves such BSBS (bull-shit backed securities) and then used those zero-yielding reserves to buy low-yielding T-bonds (which in turn a bankrupt treasury department was only too happy to sell through its lackey primary dealer system).

The problem arises when the bond/stock/real estate/all asset bubble bursts.  Then that yield disappears as the value of the investment plummets.  What will be the answer? 

The Fed's answer to that situation will be that the banks need more reserves to shore up their balance sheets.  So the electronic printer will light up again.

This will continue until everybody figures out what Zerohedge already knows.

Fri, 07/12/2013 - 14:32 | 3746058 HowardBeale
HowardBeale's picture

Leave the poor man alone. He's in denial; justifying his perspective to secure that check. Once CNBC goes down--which it soon will--he won't be able to find employement and you know what comes after denial: Suicide. Leave that poor man alone....


Fri, 07/12/2013 - 12:11 | 3745500 kchrisc
kchrisc's picture

Could it be that he is having guillotine nightmares?!

Fri, 07/12/2013 - 12:14 | 3745515 Peter K
Peter K's picture

 Funny how the market ignores USD positive headlines.


Fri, 07/12/2013 - 12:14 | 3745516 MrBoompi
MrBoompi's picture

There's nothing wrong with a housing boom, as long as it's not "fake".  If you had to put down 20% and mortgage rates were not artificially low, you'd have a stable housing market.  A boom should be for benefit of the citizens, not the banks.  But TPTB will never think this way.

Fri, 07/12/2013 - 12:17 | 3745529 NoDebt
NoDebt's picture

Or if human beings multiplied like Tribbles.  Then we might need a housing boom.

Fri, 07/12/2013 - 12:30 | 3745596 adr
adr's picture

Housing should never increase in artificial value. Sure home values going up is good for owners who have held their home for a long time, but it is terrible for any later generation.

In 1986 my dad made $70k and bought a 2500 sq ft home in a top ranked suburb with great schools for $138k. Property taxes were $1100 a year.

In 2013 I make $70k a year but the same home is now $265k, was $375k in 2006, and taxes are $4800 a year.

To find a situation of similar purchasing power I need to move to a lower class suburb with low to average ranked schools. For $125k, I can get 1500sq ft home and taxes are $2100 a year. If I want to find a 2500 sq ft home for $130k, I need to move to a nicer enclave bordered by ghetto.

The kicker is I know for a fact that it was easier to find a job paying $60-70k in 1986 than it is in 2013. The purchasing power of the dollar was also far greater. So what did the massive increase in home values from 1986 really do for us?

Yes it allowed the boomer generation to use their homes as ATMs and give us a few years of fake economic growth, but it decimated the prospects for my generation.


Fri, 07/12/2013 - 12:38 | 3745628 MachoMan
MachoMan's picture

Not particularly...  it's only decimated our prospects to the extent that we're forced to participate in the present cost-push inflationary economy.  To the extent we can avoid it, there may be opportunities far beyond what our parents ever had in their lives.  (rapid asset price changes).  So, it's not necessarily all bad news bears, but for the present, yes, I agree we got fucked.

Fri, 07/12/2013 - 12:58 | 3745729 moonman
moonman's picture

I wish my taxes were $4800 a year.

That doesn't even cover the school district.

Fri, 07/12/2013 - 14:27 | 3746043 venturen
venturen's picture

Just ad a zero and you get my property taxes....and I don't even send my kids to the shit schools in to love NJ. Home of corruption!

Fri, 07/12/2013 - 12:14 | 3745517 Jason T
Jason T's picture

too late.

Besides, armstrongs thinks captital is coming to come roaring to the U.S. in the next 2 years creating another 1929 or 1989 japan style stock market run .. while interest rate rise and the Fed raises rates trying to stop it.  

just too much intervention in nature.. we'll pay the price.

Fri, 07/12/2013 - 12:57 | 3745718 Lord Blankcheck
Lord Blankcheck's picture

Armstrong's computer is predicting that outcome.Martin is just an innocent bystander.

Sun, 07/14/2013 - 12:05 | 3751385 mkhs
mkhs's picture

Who is this Armstrong and WhyTF do I care? 





Unauthorized use may be a breach of fourth amendment rights.

Fri, 07/12/2013 - 12:16 | 3745525 TrustWho
TrustWho's picture

Thank-you Elizabeth A. Duke for submitting your resignation today as a member of the Board of Governors of the Federal Reserve System, effective August 31, 2013. Your timing was impeccable after Mr. Bernanke spoke yesterday. 


The path the Fed has taken is no different than the cataclysmic central bank action of Zimbabwe, except USA dollar is the most important reserve currency for the world. The WORLD trusts the USA Federal Reserve to maintain a stable currency and we have failed. Currently, the fed says their models and their metrics will determine future policy decisions on QE and interest rates; however there will never be a nirvana moment when these models announce the Fed must reduce or terminate QE. If the Fed could not forecast the crisis created by housing and financial derivatives prior to the 2007/08 financial collapse, how can one believe the heavy-handed financial policies of the Fed today will end well? This will end badly and you tried to stop the madness, so thank-you for making your statement through action today.  

Fri, 07/12/2013 - 13:40 | 3745895 Farmer Joe in B...
Farmer Joe in Brooklyn's picture


When the world pulls back the curtain and sees a weak, frail, old man and not the great and powerful Oz, they're going to murder the US bond market and completely sink our battleship.  Game over.

Fri, 07/12/2013 - 14:49 | 3746121 TrustWho
TrustWho's picture

I agree.

The Fed has created a bad hand since 1998 for sure. The Fed's perceived success in the emerging market's financial crisis created a false perception of its powers. Bernanke's fear of Great Depression II drove him to put the pedal to the metal and he wll be fully exposed for playing god. I think Bernanke could have played a different hand since 2010 that would have reduced the Fed's exposure to total credibility loss, but a painless solution never did nor does it exist to the 2007/08 mess. 

Fri, 07/12/2013 - 12:18 | 3745534 alangreedspank
alangreedspank's picture

Even though it's obvious the Fed played big part in the housing bubble, that statement is not an admission.

I could say "I don't want to create another Earth" which would not necesarilly mean I created the current one.

Fri, 07/12/2013 - 12:19 | 3745539 Kaiser Sousa
Kaiser Sousa's picture

keep buying physical Gold and Silver.....


Sun, 07/14/2013 - 12:08 | 3751394 mkhs
mkhs's picture

And if we involve the insurance companies, everyone profits.



Unauthorized use violates the fourth amendment.

Fri, 07/12/2013 - 12:22 | 3745557 DOGGONE
DOGGONE's picture

The MAIN ENABLER of sizable asset price bubbles is keeping the real price histories out of sight. Just look and see:

Fri, 07/12/2013 - 12:22 | 3745558 thismarketisrigged
thismarketisrigged's picture

should have thought about that a long time ago.


its too late to prevent another bubble, as it has already happened.


at least though, some voting members of the fed are finally coming around to the fact that qe is shit and has done nothing but create trouble, and it must be stopped now.


bernanke now only has only so many fed members that are with him. the list keeps getting smaller and smaller.

Fri, 07/12/2013 - 12:27 | 3745587 El Hosel
El Hosel's picture

We who? No way the "deciders" don't want another housing boom, the banks are off-loading upsidedown houses with reckless abandon while they can.

Fri, 07/12/2013 - 12:50 | 3745685 TheFourthStooge-ing
TheFourthStooge-ing's picture


at least though, some voting members of the fed are finally coming around to the fact that qe is shit and has done nothing but create trouble, and it must be stopped now.

It might just be part of a noose avoidance strategy.

Fri, 07/12/2013 - 12:23 | 3745568 sschu
sschu's picture

Like some article I saw the other day, there is always a reason not to end the free money gravy train.  The economy, next election, unemployment, GDP, world-wide risks, banks need a bailout, stimulate the economy, finance the federal guvmint.  If not now, when?

Read Henninger's column on the "implosion" of big government, financed of course by our patriarchs at the Fed.

The idea that somehow guvmint is going to implode and just "go away" and everything will be happy is a pipe dream.  Guvmint is close to their objective, telling everyone what to do in nearly every facet of their life.  This insanity ends either with armed insurrection or a complete collapse of the system.  The American people are in a slumber right now, it is doubtful and questionable when/how they will wake up.  If/when they do, any potential rational solutions to the issues will be long past. 

Either way, the pain and suffering will be enormous.



Fri, 07/12/2013 - 12:32 | 3745601 Quinvarius
Quinvarius's picture




Fri, 07/12/2013 - 12:35 | 3745614 joego1
joego1's picture

Jon Corzine; "Yep I took the muppet money and by the way FU I'm walking"

Feral Reserve; "Yep we blew the bubbles and I quit"

Fri, 07/12/2013 - 12:37 | 3745622 innsbrooklad
innsbrooklad's picture

Housing bubble my ass. There is no one to buy the houses. Under 200M and over 1MM you get business donem but the middle class has been pulverized and there are no trade up buyers.


The bubble is the stock market. Plosser could not get laid in a women's prison with a handful of pardons. He does not understand the markets. Neither does Ben. 

Fri, 07/12/2013 - 12:42 | 3745647 adr
adr's picture

Affordable areas for the middle class are still getting killed. The bubble only exists in hotbeds for speculator activity, and that bubble is even bigger than 2006.

My town is seeing home values plummet because as average wages go down, so do property values. I have to move for a job, but I can't sell my home without losing at least $10k. I probably can't buy where I need to move to because they are expecting property values to drop another 5% next year. Good luck getting a loan in that case.

In the towns with $400k+ home values the prices have been skyrocketing. I can't afford to live there. So I am stuck looking in the towns with an average price cut of $15k over the past six months. Too many home owners are underwater if they drop the price too much, so they just drop the listing.

I made an offer of $145k on a house listed for $150k, and it appraised for $128k. The owner owes $140k, so he can't sell. He asked if I had $140k in cash to buy the home outright, he'd pay all the closing costs just to get out. I said, no, not even close. The bank would give me a loan up to $110k for the house. I'm not going to give the owner 30 grand and overpay by $12k on a house that might be worth $115k next year.

This is the real housing market. Thanks Bernanke.

Fri, 07/12/2013 - 12:42 | 3745649 sbenard
sbenard's picture

Now a stock market bubble is a different thing! THAT'S ok!

Fri, 07/12/2013 - 12:48 | 3745675 moneybots
moneybots's picture

Prosser proves Greenspan was a lying fraud, just as i have been saying all along.

Fri, 07/12/2013 - 12:49 | 3745679 dwayne elizando
dwayne elizando's picture

So he's not worried about the rest of the debt bubble and the gargantuan interest rate swaps bubble?

Fri, 07/12/2013 - 12:56 | 3745716 ghostfaceinvestah
ghostfaceinvestah's picture

You would think by now a genius economist like Bernanke would figure out that asset bubbles cause much more economic damage than deflation ever would.  The Japanese have been coping just fine for years with de/disinflation, but in every single case throughout history, the bursting of an asset bubble triggers huge economic destruction.

So what does Bernanke do?  Create more bubbles.


Sat, 07/13/2013 - 09:38 | 3747977 Mi Naem
Mi Naem's picture

RE: "The Japanese have been coping just fine for years with de/disinflation"

I'm not sure there's anything "just fine" about the Japanese model.  They never really allowed the deflation to occur.  had they permitted the extraordinariy painful reset, they would likely have avoided the catastrophic one about the befall them. 

Fri, 07/12/2013 - 13:12 | 3745806 polo007
polo007's picture

According to CIBC World Markets:

The world remains a place where enormous amounts of debt just keep stacking up. Paying this debt back is constantly believed to be less of an issue given the crucial assumption that economic growth rates in the order of 3% to 5% will return AND will be sustainable. Even if it does, it must be noted that “total payback” of the debt could be unlikely to ever be achieved. At some US$18 trillion of total debt in the U.S., it would take 14,400 million ounces of gold or some 160 years’ worth of annual global gold mined supply (at the current price of some US$1,240/oz. and at current global output of some 2,800 tonnes per annum) to pay this down. At the same time, gold production is about to take an almighty knock and we won’t be surprised to see as much as 25% less gold output in the next five years.

Still, much of this precarious (let’s just stop the debt load from growing) position is critically dependant on very low interest rates being maintained – once rates start moving higher, debt repayment schedules quickly blow out, while the value of bonds, in particular government bonds, starts to decline. The current dramatic decline in the value of government bonds will already see banks’ balance sheets shrinking again, with possible resultant liquidity squeezes across the globe. Euro sovereign debt costs are already up dramatically and Italy is seemingly also sitting with an apparent +30 billion euro loss in the derivatives market…

This could very quickly turn out to be a very bad scenario, but the point, as far as we are concerned, is really that it does not even need to get to this for the markets to start realizing that currencies will have to depreciate much further – we believe this to be a crucial mechanism for delivering lower sovereign debt levels long term. Gold will be the currency that continues to benefit in the longer term. So, making a positive case for the gold price is not too difficult – particularly if inflation becomes a problem much sooner than everybody currently expects.

The real problem, unfortunately, is that all of this argument is dependant on data that will only become apparent much later down the line. Right now, nobody is willing to go against the Fed. That simply means bonds and gold are both getting the “chop” because the Fed is signaling a return to stronger economic growth – leading to a stronger U.S. dollar.

Fri, 07/12/2013 - 13:19 | 3745831 lasvegaspersona
lasvegaspersona's picture

but Gov Plosser...if we curtail QE how will we fund the government?

Fri, 07/12/2013 - 13:55 | 3745946 Clowns on Acid
Clowns on Acid's picture

Waiting for more Fed Governors to resign and announce that they are taking up subsistence farming.

That should get the T Bond market moving....south.

Sun, 07/14/2013 - 12:20 | 3751429 mkhs
mkhs's picture

Just remember, Tim Geithner is the sharpest tack in the box.  He will save us.    Where did I here that?

Fri, 07/12/2013 - 14:41 | 3746094 HowardBeale
HowardBeale's picture

You'd think it was options expiration the way their holding the S&P to within a penny either way...

Fri, 07/12/2013 - 15:01 | 3746159 Nue
Nue's picture

Of course they don't want to create a "housing bubble". Why create just a housing bubble when you can create a bubble in Bonds, Houses, Stocks, and corporate profits. All at the same time! 

The music must stop eventually and when it does. Pop Goes the Weasles Motherfuckers! :D

Fri, 07/12/2013 - 15:12 | 3746196 Bow Tie
Bow Tie's picture

too late, dollar bubble is a bubble in the soil itself.

Sun, 07/14/2013 - 12:23 | 3751444 mkhs
mkhs's picture


too late, dollar bubble is a bubble in the soil itself.

too late, dollar bubble is a bubble and soiled itself.

My apologies if english is your second language.

Fri, 07/12/2013 - 16:14 | 3746438 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

i hate to be a poo pooer but he didn't admit the fed's hand in the creation of the first bubble, but merely acknowledged its existence and alluded to the desire not to lend a hand the second time (too little too late but still is what it is)

Fri, 07/12/2013 - 17:49 | 3746711 Big Ben
Big Ben's picture

I think the first housing bubble was mostly due to the introduction of mortgage-backed securities which caused a huge decline in lending standards enabling lots of subprime borrowers who really had no business purchasing a home to get into the housing market. Fannie/Freddie also played a big roll. The Fed did keep interest rates low for too long, but I don't think it was the main cause.

Lending standards seem a lot higher now (although I sense that they are beginning to loosen a bit) and the current housing boom seems to be fueled mainly by super-low mortgage rates. The Fed is buying about a trillion dollars a year in MBS, so I think it is definitely fair to say that the Fed is mainly responsible for the current boom. Whether it is a bubble depends on whether mortage rates can stay at their current low levels for an extended period. I think rates will rise sharply if the Fed tapers and current buyers will be stuck in homes they cannot sell.

Fri, 07/12/2013 - 18:20 | 3746777 Umh
Umh's picture

That's funny!

Sat, 07/13/2013 - 07:21 | 3747856 Burst
Burst's picture

C'mon ZH . . . while no one else has bothered to do the basic math I thought you guys would have enlightened the rest of the mkt (and maybe you have and I missed it).  But if half the FOMC members think they should begin tapering by year-end, and another few believe they should begin tapering now, and considering that there aren't that many people in the room at Marriner Eccles on FOMC days, then significantly MORE THAN HALF believe tapering should begin by year-end.


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