History will not look kindly on Alan Greenspan

[Phoebe Loosinhouse]

And it won't take too long to get to that point. Alan Greenspan lent money too freely too cheaply for too long. Anyone could have told him a couple of years ago to tamp down a super-heated real estate market by raising rates slowly and predictably, but he did not. I have a new understanding of the risk that easy money also took into the stock market - there's always a day of accountability. Alan Greenspan may end up being the architect of a major economic downturn for both stocks and real estate in the near future. Those seatbelts need fastening.

[aquart]

1. I look pretty unkindly now. Why wait?

[Phoebe Loosinhouse]

3. I agree, but you and I are in the minority

I have been screaming for a slow rise to interest rates for a long time to tamp down the heat in the real estate market which is 2 legs of a 3 legged stool that is about to fall over because it is top-heavy. Money has been too easy for one sector and too much money is in one sector. Bad, bad, bad. But I never gave a thought as to how much leverage there is in the stock market until I read a scary and thoughtful feature about that topic. Uh oh!

[GrumpyGreg]

2. The RE bubble has burst here in Eastern Massachusetts.

[Phoebe Loosinhouse]

4. how so? details please nt.

[GrumpyGreg]

9. Condo sales are down,home sales are down---those that sell

are on the market longer,and the big factor is that prices are dropping,not much,but they are dropping.

Last Sundays's Boston Globe had a very high percentage of "Price Reductions",something that was unheard of a year ago.

[Burried News]

5. Medal of Freedom ... what a sick Joke even by Rovian standards.

[unblock]

6. i think stocks have been paying the price for 5-6 years now.

the stock market has gone nothing but sideways for entire shrub occupancy. i think this lengthy period of sideways movement, averaged in with the "irrational exuberrance" days, makes for a fairly reasonable market. we just got a decade's worth of gains shoved into the first few years and needed to make up for it with a flat market for the rest of the decade.

i think the same thing will happen in real estate. i don't expect any dramatic crash, just a very long period of sideways motion.

meaning, the biggest investment most families ever have is going to be doing nothing exciting for a long, long time.

[Alcibiades]

8. Stocks do better under Democrats

Which is a message that we have not gotten out. I think that the idea of the Republicans as "the party of economic responsibility" should be dead soon.

Rich people have two ways to increase their income: invest it in productive economic activity (which presumably benefits all, or at least has some positive spillover) or lobby for ever greater tax cuts. I think that when Republicans cut taxes, they actually create a perverse incentive for the rich to consume, rather than invest.

[Alcibiades]

7. Debt isn't bad

or so the economists say, assumming, however, it's invested in actually productive economic activity. It seems that most of the loose money got invested into information technology, where any productivity was lost to employees planning their vacations, looking at porn, shopping on E-Bay, etc. The rest was used to dissasemble American factories and ship them abroad, first to Mexico, and now to China. Lots of paper wealth was generated by the rise in real estate prices in certain parts of the country (mainly the blue states, oddly enough, the places where folks actually want to live), but vanished when homeowners took out mortgages to make up for declining real income, most of which was spent on consumables.

I agree we are en route to an "adjustment." Greenspan's policies have delayed it, thus making the ensuing global depression deeper and of longer duration. The good news may be for folks who owe lots of money. In real terms, their debt will be much lower. The bad news is that their incomes will also continue to decline.

[janedoe]

11. Do you mean to say that THIS doesn't look bad???

[Alcibiades]

12. No, that's not bad, it's horrible.

I don't think that I said that the federal debt is good. I meant that debt, in and of itself, isn't bad, assuming it's invested properly. Then I outlined some of the ways our debt has been badly used (i.e., cashing out home equity for personal consumption, people assuming debt as a substitute for declining wages, etc.).

I was referring, by the way, to private debt. We were talking about Greenspan, and it's the level of debt owed by the private sector, by and large, that is changed by the Fed's control of interest rates, as you know. People have borrowed foolishly because the cost of doing so has been kept artificially low, in a misguided attempt to avoid a recession. The public debt is set by the Congress and the president, and not the Fed.

As far as the public debt goes, it's bad, as your graphs so neatly indicate (swell graphs, BTW!) The numbers are huge--according to one source, $53 trillion for the government and 30 trillion for the private sector. A crisis, to be sure. I actually think the most challenging problem may be the 10 trillion in household debt. Governments have a lot more tools at their disposal to deal with their debt than households. Of course, when I borrow $1 to buy clothes for my baby, at least a real human need has been met, whereas a $1 spent on the War in Iraq simply gets you more War in Iraq, something that's completely unnecessary and wasteful, in both human and economic terms.

[madmark]

10. Budget busting enabling rep whore hack

[seabeyond]

13. i am fastened and have been for two years. lets get on with it

so that we can start healing. the waiting is not good