Aknauta
03-05-2003, 06:53 PM
Mises.org
Wednesday, March 05, 2003
Housing Bubble: Myth or Reality?
by Frank Shostak
[Posted March 5, 2003]
Federal Reserve Chairman Alan Greenspan said on Thursday, during questioning by the Senate's special committee on aging, that he does not believe that a housing price bubble exists on a national level in the United States.
"The notion of a bubble bursting and the whole price level coming down seems to me as far as a national nationwide phenomenon, is really quite unlikely," Greenspan said. He does say that it is unrealistic to believe that housing prices will increase at the current rate, but as for a bubble, he says no way.
Is he right? To provide an answer to this one needs to establish, or define, exactly what a bubble is.
We can define a bubble as activities that spring up on the back of loose monetary policy of the central bank. In other words, in the absence of monetary pumping these activities would not emerge. Since bubble activities are not self-funded, their emergence must come at the expense of various self-funded or productive activities.
Link (http://www.mises.org/fullstory.asp?contro l=1177)
Wednesday, March 05, 2003
Housing Bubble: Myth or Reality?
by Frank Shostak
[Posted March 5, 2003]
Federal Reserve Chairman Alan Greenspan said on Thursday, during questioning by the Senate's special committee on aging, that he does not believe that a housing price bubble exists on a national level in the United States.
"The notion of a bubble bursting and the whole price level coming down seems to me as far as a national nationwide phenomenon, is really quite unlikely," Greenspan said. He does say that it is unrealistic to believe that housing prices will increase at the current rate, but as for a bubble, he says no way.
Is he right? To provide an answer to this one needs to establish, or define, exactly what a bubble is.
We can define a bubble as activities that spring up on the back of loose monetary policy of the central bank. In other words, in the absence of monetary pumping these activities would not emerge. Since bubble activities are not self-funded, their emergence must come at the expense of various self-funded or productive activities.
Link (http://www.mises.org/fullstory.asp?contro l=1177)