Last week, Peter Schiff began his epic take-down of the myth of Janet Yellen's forecasting ability [6]. As proof of her wisdom supporters had pointed to speeches she delivered in 2005 and 2006 in which she supposedly issued clear warnings about the dangers then building in the frothy real estate markets. Without any attempt at reasonable fact checking, these claims have been parroted by the media.. and that is what Schiff so diligently destroyed. However, Schiff notes in this follow-up, there is a key statement she makes (in justifying the 'fundamentals' behind the housing bubble) that relates to credit and speculative leverage that is crucial to understand the way she sees the world and thus - what to expect from her Fed.
2005 San Francisco Speech excerpt (used by many to justify the fact that she may have identified the bubble)...
So fundamentals showed it was a 'bubble' but she justifies it on the basis of the fact that HELOCs created more liquidity in home value - thus creating yet more speculative leverage (right in front of her face...)