Comments (9)

• Cramchakl

  Everyone.

  The Fed, The Guv'ment, The Morons who voted them in, The Banks for making unsavvy loans, The Developers for out of control building, You and Me for not screaming loudly enough before it happened, and more. No one gets away clean in this.

  Though, Blamestorming isn't really a constructive method of autopsy.

  Published: July 16, 2009 8:24 AM

• Christopher

  "During Mr. Reagan's administration, twenty million new jobs were created. The ranks of the middle class swelled, and Americans once again had a positive outlook on the future. Even the once-battered central cities were revitalized and began gaining population — a trend that continues to this day. To his credit, the left-leaning Bill Clinton was shrewd enough to discern the positive effects of Reaganomics "

  Geez..I remember Reagan years as explosive deficits and a stock market crash in 87'.

  Published: July 16, 2009 8:28 AM

• greg

  First of all, real estate is not a great investment. A home is a great place to live, but if you are looking to make a great windfall, try something else.

  The transaction cost to buy and sell real estate is extremely high at an average of 10%.

  The interest and property tax cost take a large cut of the yearly gains.

  Proper maintenance and utility fees are much higher than a good rental.

  So why the increased demand in housing?

  The answer is not the drop in the Fed Funds Rate! The answer falls within the increase in participant in the real estate investment arena.

  Why does a stock split when it really does not add any value to the stock. The answer is that at the lower price it will attract more participants to buy the stock. In real estate investment, a $200,000 home is hard for many investors to buy. But at $10,000, they can justify the investment in a market they feel is always going up. That is exactly what the new ETF's and REIT's provided. So now the number of participants and money increased.

  This demand was not for shelter, it was pure speculation. Prices increased on this speculation in areas that were highlighted by the Case-Shiller index as speculators picked their markets based on that index. Don't you think it is kind of funny how the speculation followed so close to those cities in the index while middle America was left behind.

  And while the Fed Funds Rate has a direct relationship with the Prime Rate, mortgage rates are tied to the 10 year Treasury which rates are set every day through the markets in Chicago.

  Published: July 16, 2009 8:46 AM

• fundamentalist

  greg: "The answer is not the drop in the Fed Funds Rate! The answer falls within the increase in participant in the real estate investment arena."

  Where did the participants get the money to invest in real estate? It's true that some of it came from the stock market, but since 2002, the stock market and home prices climbed together, as did the price of oil, gold and most commodities. for existing money to go into house prices, it would have been withdrawn from other sectors and the prices in those sectors would have fallen.

  In order for prices in all asset classes to rise as they did, the Feds have to mint new money. There is no other possibility. That's why the study of economics under a fixed stock of money is so important.

  greg: "...mortgage rates are tied to the 10 year Treasury..."

  While true, where do banks get their money to loan on houses? Do they strictly use 10-yr CD's? I wish! They borrow from the Feds on short term and loan long term. There is a huge mismatch between terms, which is a constant problem in banking. It works great as long as the yield curve slopes upward, be is hell when the Feds raise rates and the yield curve tilts.

  Published: July 16, 2009 11:15 AM

• Oprah Said It

  At first, when I was starting to be a libertarian, I blamed the government for being a tyrant which extorts from us and misdirects us.

  But I was shocked when I saw all the stupid people following Oprah like sheeples and voting for Obama just because it was the fad and "in" thing to do and just because Oprah said so.

  I have completely lost faith in mankind and I think that government is just the icon of a more sinister evil that roots in each and everyone of us.

  Published: July 16, 2009 12:02 PM

• Toby

  I think the author is wrong in proclaiming that the housing bubble was the CRA's fault. If you look at the statistics, you will see that only a small fraction of all foreclosures had anything to do with CRA.

  The housing bubble was a typical monetary boom, caused by Greenspan's FED, whereas the CRA caused only minor distortions.

  Published: July 16, 2009 1:10 PM

• Ohhh Henry

  "To effect change, policy must be enacted. This can only be done by politicians through the political process."

  I disagree. Political action is not the answer.

  Politicians are not motivated to find and implement "better" policies, i.e. ones which provide the greatest good to the greatest number of people. The most successful politicians and political parties are the ones which (a) cause chaos and poverty in society, then (b) cultivate one or more segments of voters from among the victims of the bad policies in order to gain their votes.

  For example, one party pushes for high taxes, minimum-wage laws, etc. which cause unemployment and poverty among immigrants and minorities, then cultivates the votes of those people by promising to help them get money, jobs etc. Another party creates chaos around the world with their foreign policy, provoking terrorist and military threats against the homeland, and then cultivates the votes of the old, established conservative segments who feel that their lives and property are in danger.

  In the end every major political party will support and extend the chaos-causing boondoggles of the other major parties, so you will see leftist-liberal parties continuing and expanding foreign wars while rightist-conservative parties will continue and expand domestic welfare schemes.

  Once these parties have divided society into various hostile segments of aggrieved victims then there is really no way that sensible, pragmatic people can ever take over the political system and turn it in a better direction.

  Therefore I think that to effect change it is up to the public to question, criticize, denounce, evade, ignore and in general treat politicians and bureaucrats with the utter contempt that they deserve. Peacefully, but firmly and consistently. The goal is for the state to wither away with the least possible muss and fuss.

  Published: July 16, 2009 1:41 PM

• gene

  "Upon assuming the presidency, Mr. Reagan reduced marginal tax rates and began the deregulation of the American economy.

  The result was decisive. It spurred the longest economic superexpansion in US history — an expansion that lasted into the sixth year of George W. Bush's presidency."

  Reagan also spent tons of fiat money, just like every president who followed and many that preceded. He used the same basic economic principles as bush, clinton, bush and now obama. the bubble began with reagan and ended with bush. reagan deserves as much credit for the bust as any of the others. much of his so called deregulation was simply corporate subsidy. when it comes to the american economy the right and the left are in perfect harmony.

  Published: July 16, 2009 11:24 PM

• no Dogma

  Time and again i am amazed by intelligent people feeling the need to stick to a dogma - In this case the 'fiscal conservative' one. ya - go ahead and blame the CRA or some other scapegoat program somewhere.

  Most people screwed up and lived in a phony economy for a while . Now, it's time to wake up . Unfortunately, we haven't woken up yet . Fed is pumping more money to prop up asset prices and short term economic boost . what happens when this caffeine shot wears off ? I fear we are in for rude awakenings . we still keep hearing same old stupid arguments from same pundits - example "Chinese have no choice but to buy treasuries" .

  hey - when you can't stop this madness, join it. Ride the next asset bubble to the top . There will be one - we just don't know what asset, yet . where else will the newly printed dollars go ? get out of the bubble ( if you can) before it bursts.

  P.S: I agree with 'Oprah Said It' . I love the quote " ...government is just the icon of a more sinister evil that roots in each and everyone of us"

  Published: July 17, 2009 4:01 PM