FOMC 2006 Transcripts: The 1% Solution

[georgephillip]

Anyone remember 2006, the year when the $8trillion housing bubble began to deflate?
Maybe now we know why the Fed waits five years before making their crimes public:

"There is no one in the eight FOMC meetings who suggests that the economy faces any serious turbulence ahead. There is not even discussion that a mild recession could be in sight.

"In fact, at the last meeting of 2006 (pdf), we hear Janet Yellen, who was then the president of the San Francisco Bank and is now vice-chair of the board of governors, comment that:

"'There are some encouraging signs that the demand for housing may be stabilizing … After a precipitous fall, home sales appear to have leveled off … Finally, the gap between housing prices and fundamentals might not be as large as some calculations suggest.'"

Alan Greenspan's Ship of Fools | Truthout

At the last FOMC meeting in 2006 some members expressed concern that the unemployment rate of 4.5% was too low to keep inflation in check.

They did solve that problem for the benefit of the 1%.
Not so much for the 99%.

 

[georgephillip]

"The FOMC seemed utterly oblivious to the fact that the savings rate had been driven to record lows by the wealth generated by the housing bubble; and that this consumption boom would end when the housing bubble wealth disappeared.

"People who no longer had equity in their homes could not borrow to support their consumption.

"Furthermore, those who had expected that home equity would support them in retirement would soon discover that they had to cut back in a big way on consumption in order to rebuild their savings.

"It also should have been obvious that a serious wave of defaults was going to hit the financial system.

"Housing is always a highly leveraged asset, but that was far more true in 2006 than at any prior point in history, as many people were buying homes putting literally nothing down.

"With prices plunging, millions of homeowners would fall under water. This guaranteed more foreclosures and higher losses on each one."

Alan Greenspan's Ship of Fools | Truthout

It seems obvious those serving on the Federal Reserve's Board of Governors in 2006 weren't unaware of the "epidemic of mortgage fraud" the FBI began warning about in 2004.

It's equally obvious the Fed choose to serve the rich at the expense of everyone else.

 

[EdwardBaiamonte]

"
It's equally obvious the Fed choose to serve the rich at the expense of everyone else.

of course thats 100% absurd since the Wall Street rich mostly went bankrupt!!

 

[georgephillip]

Then explain why the world's richest have now recouped their losses from 2008 and there are 11 million more of them than before the latest Wall Street looting.

 

[EdwardBaiamonte]

Then explain why the world's richest have now recouped their losses from 2008 and there are 11 million more of them than before the latest Wall Street looting.

This month the IRS released more detailed tax data for 2009, and the nearby table records the decline of the taxpaying rich.


In 2007, 390,000 tax filers reported adjusted gross income of $1 million or more and paid $309 billion in taxes. In 2009, there were only 237,000 such filers, a decline of 39%. Almost four of 10 millionaires vanished in two years, and the total taxes they paid in 2009 declined to $178 billion, a drop of 42%.

Those with $10 million or more in reported income fell to 8,274 from 18,394 in 2007, a 55% drop. As a result, their tax payments tanked by 51%. These disappearing millionaires go a long way toward explaining why federal tax revenues have sunk to 15% of GDP in recent years. The loss of millionaires accounts for at least $130 billion of the higher federal budget deficit in 2009. If Warren Buffett wants to reduce the deficit, he should encourage policies to create more millionaires, not campaign to tax them more

 

[georgephillip]

And by June 2011 the worlds "high net worth individuals" defined as having more than $1 million of free cash by Merrill Lynch and Capgemini surpassed their 2007 peak of $40.7 trillion largely because of austerity budgets implemented by governments owned by the richest 1%.

It's time to stop borrowing from the rich and tax them at the same rates Eisenhower did.

 

[EdwardBaiamonte]

And by June 2011 the worlds "high net worth individuals" defined as having more than $1 million of free cash by Merrill Lynch and Capgemini surpassed their 2007 peak of $40.7 trillion largely because of austerity budgets implemented by governments owned by the richest 1%.

Are you talking the world including China and India? What does it have to do with austerity??? The more rich the better since a rising tide lifts all boats. Today, for example, the poor have state of the art health care despite not being able to pay for it or invent it. This is not trickle down it is tsunami down Republican capitalism!

It's time to stop borrowing from the rich and tax them at the same rates Eisenhower did.

of course thats idiotic since 1) in the 1950's we had the only economy left standing after WW2, 2) even liberals like Charlie Rangel want to lower taxes to be competitive, 3) the rich create our jobs and products so the more we steal from them the less they can help us, 4) it makes more sense to tax the poor since they don't use the money to create new jobs and new products.

 

[DSGE]

Macro and Other Market Musings: Pushback on the FOMC Transcript Hysteria

 

[georgephillip]

And by June 2011 the worlds "high net worth individuals" defined as having more than $1 million of free cash by Merrill Lynch and Capgemini surpassed their 2007 peak of $40.7 trillion largely because of austerity budgets implemented by governments owned by the richest 1%.

Are you talking the world including China and India? What does it have to do with austerity??? The more rich the better since a rising tide lifts all boats. Today, for example, the poor have state of the art health care despite not being able to pay for it or invent it. This is not trickle down it is tsunami down Republican capitalism!

It's time to stop borrowing from the rich and tax them at the same rates Eisenhower did.

of course thats idiotic since 1) in the 1950's we had the only economy left standing after WW2, 2) even liberals like Charlie Rangel want to lower taxes to be competitive, 3) the rich create our jobs and products so the more we steal from them the less they can help us, 4) it makes more sense to tax the poor since they don't use the money to create new jobs and new products.

That"tsunami of Republican capitalism" coincided with more US job losses in a single decade than any other state in history with the exception of the USSR during the last ten years of its existence.

India has everything to do with austerity according to the 250,000 debt-ridden farmers who've committed suicide and the 800 million survivors who've seen their boats scuttled to make room for the richest 100 of their countrymen to consolidate assets equivalent to a quarter of India's GDP.

The rich don't create jobs.
Middle class demand does.
It makes more sense to tax the rich at Eisenhower rates and fund a new WPA.
If the Koch brothers don't like it, they can move to Mumbai.

 

[georgephillip]

Macro and Other Market Musings: Pushback on the FOMC Transcript Hysteria

What's your definition of a "smidgen"?

"It may not have been obvious who was going to take the hits, but economists who could see the world with clear eyes knew that big hits were coming.

"Unfortunately, none of them was sitting on the FOMC.

Here's what Frederick Mishkin, a Federal Reserve Board governor who later played a starring role in the movie Inside Job, had to say about the risks from the housing market in that same December 2006 meeting:

"'I don't see any indications that we will have big spillovers to other sectors from weak housing and motor vehicles. In that sense, there's a slight concern about a little weakness, but the right word is I guess a "smidgen," not a whole lot.'"

Alan Greenspan's Ship of Fools | Truthout

 

[DSGE]

Macro and Other Market Musings: Pushback on the FOMC Transcript Hysteria

What's your definition of a "smidgen"?

"It may not have been obvious who was going to take the hits, but economists who could see the world with clear eyes knew that big hits were coming.

"Unfortunately, none of them was sitting on the FOMC.

Here's what Frederick Mishkin, a Federal Reserve Board governor who later played a starring role in the movie Inside Job, had to say about the risks from the housing market in that same December 2006 meeting:

"'I don't see any indications that we will have big spillovers to other sectors from weak housing and motor vehicles. In that sense, there's a slight concern about a little weakness, but the right word is I guess a "smidgen," not a whole lot.'"

Alan Greenspan's Ship of Fools | Truthout

Why do you think a central bank is capable of recognising bubbles? Bubbles by their very nature are elusive (since if it were obvious to everybody that there was a bubble it would be arbitraged away). Who's the best equipped to identify bubbles? A central bank or markets? If the markets didn't pick up on it why would the central bank? Even if they could identify a bubble, they shouldn't even try to pop it since doing so would involve crashing the economy anyway. The Fed should have done exactly what they did: Keep inflation (and NGDP growth) expectations firmly anchored. They did that well til mid 2008 when for no reason they allowed them to plummet.

 

[georgephillip]

Macro and Other Market Musings: Pushback on the FOMC Transcript Hysteria

What's your definition of a "smidgen"?

"It may not have been obvious who was going to take the hits, but economists who could see the world with clear eyes knew that big hits were coming.

"Unfortunately, none of them was sitting on the FOMC.

Here's what Frederick Mishkin, a Federal Reserve Board governor who later played a starring role in the movie Inside Job, had to say about the risks from the housing market in that same December 2006 meeting:

"'I don't see any indications that we will have big spillovers to other sectors from weak housing and motor vehicles. In that sense, there's a slight concern about a little weakness, but the right word is I guess a "smidgen," not a whole lot.'"

Alan Greenspan's Ship of Fools | Truthout

Why do you think a central bank is capable of recognising bubbles? Bubbles by their very nature are elusive (since if it were obvious to everybody that there was a bubble it would be arbitraged away). Who's the best equipped to identify bubbles? A central bank or markets? If the markets didn't pick up on it why would the central bank? Even if they could identify a bubble, they shouldn't even try to pop it since doing so would involve crashing the economy anyway. The Fed should have done exactly what they did: Keep inflation (and NGDP growth) expectations firmly anchored. They did that well til mid 2008 when for no reason they allowed them to plummet.

Dean Baker and others recognized the housing bubble in November of 2005 when they pointed out how the sale price of houses had risen 55% during the previous eight years after adjusting for inflation. According to Baker there was no precedent for this sort of run up in home prices.

 

[DSGE]

What's your definition of a "smidgen"?

"It may not have been obvious who was going to take the hits, but economists who could see the world with clear eyes knew that big hits were coming.

"Unfortunately, none of them was sitting on the FOMC.

Here's what Frederick Mishkin, a Federal Reserve Board governor who later played a starring role in the movie Inside Job, had to say about the risks from the housing market in that same December 2006 meeting:

"'I don't see any indications that we will have big spillovers to other sectors from weak housing and motor vehicles. In that sense, there's a slight concern about a little weakness, but the right word is I guess a "smidgen," not a whole lot.'"

Alan Greenspan's Ship of Fools | Truthout

Why do you think a central bank is capable of recognising bubbles? Bubbles by their very nature are elusive (since if it were obvious to everybody that there was a bubble it would be arbitraged away). Who's the best equipped to identify bubbles? A central bank or markets? If the markets didn't pick up on it why would the central bank? Even if they could identify a bubble, they shouldn't even try to pop it since doing so would involve crashing the economy anyway. The Fed should have done exactly what they did: Keep inflation (and NGDP growth) expectations firmly anchored. They did that well til mid 2008 when for no reason they allowed them to plummet.

Dean Baker and others recognized the housing bubble in November of 2005 when they pointed out how the sale price of houses had risen 55% during the previous eight years after adjusting for inflation. According to Baker there was no precedent for this sort of run up in home prices.

It's all well and good to speculate that there's a bubble, but if any people could actually identify it with certainty then they'd make millions of dollars in riskless profit. I never see Krugman or Ron Paul or Dean Baker talking about the gigantic wealth they amassed being the only ones to "know" that there was a housing bubble. And if they could show with amazing evidence that there was a bubble, why is it that the rest of the market didn't catch on and immediately arbitrage the bubble away? Making a guess, with nothing riding on it, that turns out to be true doesn't mean shit.

 

[EdwardBaiamonte]

Even if they could identify a bubble, they shouldn't even try to pop it since doing so would involve crashing the economy anyway.

you should try law school to learn to think clearly. 1) In the future they will identify and pop obviously!!, and 2) a smaller crash in 2006 before Lehman and Bear would not have been "the crash" for Gods sake!!!!!

 

[DSGE]

Even if they could identify a bubble, they shouldn't even try to pop it since doing so would involve crashing the economy anyway.

you should try law school to learn to think clearly. 1) In the future they will identify and pop obviously!!, and 2) a smaller crash in 2006 before Lehman and Bear would not have been "the crash" for Gods sake!!!!!

What the fuck are you talking about?

 

[georgephillip]

Why do you think a central bank is capable of recognising bubbles? Bubbles by their very nature are elusive (since if it were obvious to everybody that there was a bubble it would be arbitraged away). Who's the best equipped to identify bubbles? A central bank or markets? If the markets didn't pick up on it why would the central bank? Even if they could identify a bubble, they shouldn't even try to pop it since doing so would involve crashing the economy anyway. The Fed should have done exactly what they did: Keep inflation (and NGDP growth) expectations firmly anchored. They did that well til mid 2008 when for no reason they allowed them to plummet.

Dean Baker and others recognized the housing bubble in November of 2005 when they pointed out how the sale price of houses had risen 55% during the previous eight years after adjusting for inflation. According to Baker there was no precedent for this sort of run up in home prices.

It's all well and good to speculate that there's a bubble, but if any people could actually identify it with certainty then they'd make millions of dollars in riskless profit. I never see Krugman or Ron Paul or Dean Baker talking about the gigantic wealth they amassed being the only ones to "know" that there was a housing bubble. And if they could show with amazing evidence that there was a bubble, why is it that the rest of the market didn't catch on and immediately arbitrage the bubble away? Making a guess, with nothing riding on it, that turns out to be true doesn't mean shit.

There's nothing speculative about a 55% rise in housing prices over an eight year period after adjusting for inflation. That was documented for anyone to see in November of 2005.

As to why Baker and Krugman and Paul didn't profit from the housing bubble, maybe they're not as fucking greedy as you are.

 

[EdwardBaiamonte]

As to why Baker and Krugman and Paul didn't profit from the housing bubble, maybe they're not as fucking greedy as you are.

or maybe they didn't want to take the risk. You may know there is a bubble but this is different from knowing when it will pop and betting on it!.

 

[DSGE]

Dean Baker and others recognized the housing bubble in November of 2005 when they pointed out how the sale price of houses had risen 55% during the previous eight years after adjusting for inflation. According to Baker there was no precedent for this sort of run up in home prices.

It's all well and good to speculate that there's a bubble, but if any people could actually identify it with certainty then they'd make millions of dollars in riskless profit. I never see Krugman or Ron Paul or Dean Baker talking about the gigantic wealth they amassed being the only ones to "know" that there was a housing bubble. And if they could show with amazing evidence that there was a bubble, why is it that the rest of the market didn't catch on and immediately arbitrage the bubble away? Making a guess, with nothing riding on it, that turns out to be true doesn't mean shit.

There's nothing speculative about a 55% rise in housing prices over an eight year period after adjusting for inflation. That was documented for anyone to see in November of 2005.

If it were a cold hard fact then why wasn't the bubble arbitraged away? Or are you gonna tell me Wall St isn't as greedy as I am?

As to why Baker and Krugman and Paul didn't profit from the housing bubble, maybe they're not as fucking greedy as you are.

Even though they'd be doing a service by bringing house prices back in line with fundamentals. Either way, "They're not as greedy as you are" is clutching at straws.

 

[georgephillip]

As to why Baker and Krugman and Paul didn't profit from the housing bubble, maybe they're not as fucking greedy as you are.

or maybe they didn't want to take the risk. You may know there is a bubble but this is different from knowing when it will pop and betting on it!.

Whether stocks, housing, or 17th century tulips, bubbles induce people to buy an asset because its price is rising, and that pulls more buyers into the market. Prices rise further with little regard to the real value of the asset.

 

[DSGE]

As to why Baker and Krugman and Paul didn't profit from the housing bubble, maybe they're not as fucking greedy as you are.

or maybe they didn't want to take the risk. You may know there is a bubble but this is different from knowing when it will pop and betting on it!.

Bubbles usually aren't in the habit of existing for very long. Either way it doesn't matter. Because the profit is riskless. Instead of everybody buying 20-30 year treasury bonds you'd get significantly more return shorting housing assets. And remember that once a bubble is identified it'll pop almost immediately. If you've got a 20 year mortgage on a house that's definitely going to be underwater you'll try and sell it, lowering the price of housing.