Bernanke mounted a defense of the Greenspan-Bernanke free money policies at the recent economic conference in Atlanta. He blames the housing bubble on lack of regulation. But nowhere can he account for the 50% rise in home values versus the 21% rise in the CPI over the 2000-2007 period. He uses core inflation measures in evaluating Fed performance, but neglects the almost 50% decline in the dollar and the 230% rise in gold in the 2002-2006 period; today it would be a 400% gold price increase from 2002!
Judy Shelton’s report in the January 9th WSJ says it well: “His assertion that “regulatory and supervisory policies, rather than monetary policies, would have been more effective means of addressing the run-up in house prices” hints at a possible scapegoat for the housing bubble that presaged financial calamity. Yet nowhere in his 34-page apologia does the Fed chairman fault Congress for inflicting Fannie Mae and Freddie Mac on the home mortgage industry; nowhere does he attempt to analyze the damaging influence of government intervention in the private sector, or its distorting impact on market assessments of risk-and-return tradeoffs.”
For a live assessment from John Taylor of Stanford, watch Larry Kudlow’s discussion with John Taylor here.
Methinks our Fed Chairman protests too much.
Tom Motherway
#1 by Tom Motherway on January 11, 2010 - 7:48 pm
FOLLOW UP: See John Taylor's Reply to Bernanke in the January 11th WSJ:http://online.wsj.com/article/SB20001424052748703… tjm