Working Papers

What Caused the Housing Boom of the 2000s?

Not monetary policy.

posted on 14 April 2011 by skirchner in Economics, House Prices, Monetary Policy

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And who were the authors claiming that the Fed had nothing to do with it?

Jane Dokko
Federal Reserve Board

Brian M. Doyle
Board of Governors of the Federal Reserve System

Michael T. Kiley
Board of Governors of the Federal Reserve - Macroeconomic and Quantitative Studies Section

Jinill Kim
Federal Reserve Board - Division of Monetary Affairs

Shane M. Sherlund
Federal Reserve Board of Governors

Jae Sim
Federal Reserve Board

Skander Van den Heuvel
Federal Reserve Board

Well, they would say that, wouldn’t they?

Posted by .(JavaScript must be enabled to view this email address)  on  04/15  at  03:01 PM

But they are not the only ones saying it. See the Reinharts paper:


Posted by skirchner  on  04/15  at  03:21 PM

Further evidence that the Fed is a corrupt institution:


A snippet:

“A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans. Essentially, this means that if you don’t pay the Fed back, it’s no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even.

This is the deal of a lifetime. Think about it: You borrow millions, buy a bunch of crap securities and stash them on the Fed’s books. If the securities lose money, you leave them on the Fed’s lap and the public eats the loss. But if they make money, you take them back, cash them in and repay the funds you borrowed from the Fed. “Remember that crazy guy in the commercials who ran around covered in dollar bills shouting, ‘The government is giving out free money!’ ” says Black. “As crazy as he was, this is making it real.”“

Posted by .(JavaScript must be enabled to view this email address)  on  04/15  at  03:23 PM

That’s an argument against bail-outs, not the Fed.

Posted by skirchner  on  04/15  at  04:18 PM

I see that Vincent Reinhart is a former Fed employee of some 24 years. So again, it shouldn’t surprise me that he defends his employer.

But look, even if I accept that the data fails to show a correlation between loose monetary policy and rising house prices, I’d like to know where the money came from to fund the boom?

Posted by .(JavaScript must be enabled to view this email address)  on  04/16  at  05:22 PM

Banking system can create credit without much help from the CB.

Posted by skirchner  on  04/18  at  05:27 PM

True, but the Fed can also stop credit expansion, if it wants to. Which it obviously didn’t.

Posted by .(JavaScript must be enabled to view this email address)  on  04/18  at  08:40 PM

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