Who to blame for what

For the house price boom and bust blame this:

As a result the increasingly lax standards for FHA insurance once again made foreclosures commonplace. From 1975 to 2011, over 3 million FHA borrowers would lose their homes to foreclosure. Over time, powerful lobbies, politicians, and HUD pushed to replicate FHA’s abandonment of commonsense underwriting at Fannie Mae, Freddie Mac, and other parts of the mortgage market. For 8 million families experiencing foreclosure from 2007 to the present, “mortgage” once again became just another word for trouble.

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For the depression-cum-stagnation-cum-hysteresis, blame, for example, this caliber of FOMC Statements (FOMC Statement August 5 2008):

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.

Economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.

Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.

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One thought on “Who to blame for what

  1. The FOMC should have recognized that “commodities inflation” was caused by curious markets in oil and corn. China went crazy on oil demand while oil states were run by thugs. There was a collision in supply and demand. Then, in the USA the corn ethanol program exploded, skyrocketing corn prices. Gold was on the moon, driven by retail demand in India and China, mostly for tax and traditional reasons. US monetary policy hard very little to do with any of this.

    But, as ever, the devil is inflation….

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