Sorry for having fallen off the face of the Earth lately. I'll try to be more reliable now that the rain seems to have come back.
This is a slightly cheap post, but I think an important one. In yesterday's Financial Times Alan Greenspan had some of the following choice comments:
US house prices are likely to fall significantly from their present levels
...the decline in house prices “is going to be larger than most people expect”.
He said the price of risk had fallen to unsustainably low levels beforehand, with investors addicted to asset-backed securities that offered some additional yield over Treasury bonds as if they were “cocaine”.
Interesting that Greenspan is finally acknowledging a situation he helped create. We also pick up this tidbit:
As Fed chairman, Mr Greenspan had talked about “froth” in the housing sector, but never said there was a bubble in the market as a whole. His successor Ben Bernanke has also avoided the word “bubble”.
But Mr Greenspan told the FT that froth “was a euphemism for a bubble”.
He said he still thought froth – a collection of bubbles – was a better description, because of the variation in house price appreciation in different local housing markets. But he said “all the froth bubbles add up to an aggregate bubble”.