Tag Archives: housing

Economics Myths, Part 6: Alan Greenspan Caused The Financial Crisis

Greenspan: Fed Not Responsible for Financial Crisis

If a lie is repeated often enough it becomes the truth, and there are few better examples than the tar and feathering of Alan Greenspan for his alleged role the housing and financial crisis. But the preponderance of evidence suggests his culpability is limited or non-existent. In other words, Greenspan’s legacy was tarnished by events out of his control.

The predictable narrative by lazy financial pundits goes as follows: Greenspan lowered rates too low, and kept them low for too long, causing a housing bubble that imploded under his watch. Yes, Greenspan did lower interest rates from 6.5% in 2000 to as low as 1% in 2004, but what is ignored by the financial press and media is that Greenspan actually raised rates many times in the 90′s, especially in 1999, to quell the exuberance in the stock market and economy, as shown below:

One could in fact argue he was too hawkish because by 2000 the economy would enter a recession as the dotcom bubble burst. But the fact Greenspan raised rates in the 90′s and later between 2004-2006 is ignored by the media, who, in the aftermath of the crisis, kept repeating the narrative that Greenspan was somehow this ‘great blower of bubbles’. And, of course, Greenspan did warn of irrational exuberance in 1996, which went unheeded. But no one got mad when tech stock fell, but when housing prices did, everyone brought out the pitchforks and pointed them at him.

But did Greenspan leave rates too low for too long; the consensus is he did, but one must understand that lowering interest rates in response to recession is conventional monetary policy, and then 911 exacerbated things. The 2003-2007 economic expansion, with the exception of the housing market, was tepid and inflation was low, so it’s not like the economy was overheating. Maybe he should have only lowered them to 2%; however, in the grand scheme of things it would not have mattered, as the seeds of the subprime bubble were planted in the 90′s.

As explained in an earlier article Misconceptions About the 2008 Financial Crisis, the origins of the subprime crisis date back to the early 90′s when lending standards under Clinton were relaxed to boost home ownership:

The Department of Housing and Urban Development (HUD) loosened mortgage restrictions in the mid-1990s so first-time buyers could qualify for loans that they could never get before.[131] In 1995, the GSE began receiving affordable housing credit for purchasing mortgage backed securities which included loans to low income borrowers. This resulted in the agencies purchasing subprime securities.[132]

As shown above, not surprisingly, the subprime market did indeed grow, from $50 billion to $150 billion from 1994 to 1998, and, notably, this occurred as interest rates were rising. High interest rates between 1998-1999 did not reverse the subprime boom. The explosion of the subprime market between 2002-2006 was a 200% increase, which is actually the same rate of growth from 1994-1998. One could argue that the second wind in the subprime market was fueled not by low interest rates but by ‘animal spirits’ and money flowing out of tech stocks into housing. Keep in mind the subprime market boomed in the 90′s as rates were high. When the housing market popped, a lot of borrowers found themselves immediately underwater, and low interest rates would not have mattered – indeed, they didn’t as the subprime market failed to recover despite interest rates remaining at 0% since 2008. Nearly a decade later, many housing markets are still well below their 2006 highs.

Here is a chart of national home prices vs. the 10-year treasury bond, which is a good proxy for mortgage rates:

The the indictment against Greenspan is predicated on the dubious link between low interest rates and housing prices. As you can see above, further weakening the case against Greenspan, housing prices were stagnant between 1982 and 1997 as rates fell considerably. And despite rates surging from 2% to 14% between 1950 and 1982, the housing market did not fall. Given the tenuous link between interest rates and home prices, overall, the 2000′s housing boom was an extreme outlier that Greenspan couldn’t have possibly fomented, foreseen, or reversed – and this is ignoring the role played by the Clinton administration, which obviously contributed to the boom.

To anyone who has studied the data, this is self-evident, but facts tend to get lost in the ‘blame Republicans’ narrative.

The Daily View: Privacy, Silicon Valley Housing, The Failure of Democracy, Gender Achievement Gap in the Sciences

This is being passed around like an STD: What Happens Next Will Amaze You

The infamous dating site for married people Ashley Madison was hacked, revealing personal information and and easily-cracked passwords for millions of users. Some of these users are already the subject of active extortion.

Australia passed an incoherent and sweeping data retention law, while the UK is racing to pass a law of its own.

The horrible Hacking Team got hacked, giving us a window into a sordid market for vulnerabilities and surveillance technology.

The 2014 Sony Pictures hack exposed highly sensitive (and amusing) emails and employee data.

According to the left’s logic, the hacking of Sony emails is amusing, but the hacking of Ashley Madison is a crisis and a crime against humanity. Passwords don’t matter if the database is compromised. The liberal ‘sanctity of privacy’ in regard to infidelity, cookies, and celebrity nudes apparently doesn’t apply to the NSA or corporations like Sony. And people who are on Ashley Madison, just like celebrities who post salacious photos on their phones and cloud storage devices, deserve to be exposed for living immoral, depraved lives. If you care about privacy, stop using cloud storage and buy a thumb drive. Very simple solutions.

The left tries to present privacy as an all-or-nothing issue; either you have full privacy or totalitarianism. I’ll sacrifice a little freedom and privacy if it means not being blown into smithereens when flying. I support free markets, but am not one of those nutty civil libertarian types.

The same liberals who pretend to care about the troops oppose technology (drones) that would result in fewer deaths of servicemen.

Soon the web was infested with all manner of trackers, beacons, pixels, tracking cookies and bugs. Companies learned to pool their data so they could follow customers across many sites. They created user profiles of everyone using the web. They could predict when a potential customer was going to do something expensive, like have a baby or get married, and tailor ads specifically to them.

They learned to notice when people put things in a shopping cart and then failed to buy them, so they could entice them back with special offers. They got better at charging different prices to people based on what they could afford—the dream of every dead-eyed economist since the dawn of the profession.

Heaven forbid corporations try to make a profit, and – gasp – make our user experience easier?

If at the height of boom times we can look around and not address the human crisis of our city, then when are we ever going to do it? And if we’re not going to contribute to our own neighborhoods, to making the places we live in and move through every day convenient and comfortable, then what are we going to do for the places we don’t ever see?

The San Francisco housing affordability situation is a supply and demand problem, not due to ‘greedy’ tech capitalists. There is a scarcity of home in this sought-after region, and second, as I explain in an earlier article, zoning and other costs make it difficult to establish new housing. The slideshow also fails to mention efforts by Google to make housing more affordable:

Google Offers Affordable Housing
Google offers free Fiber internet in public housing
Google invests $28 million in affordable housing

Up to 400 housing units, targeted toward low-income and median-income households, could be built in the area, depending on how much building allotment Google is granted. (The location would be 4.5 acres of land that Google purchased last year for $98.1 million, and is outside of North Bayshore, bordering Sunnyvale.)

But of course, we can’t let counter-evidence get in the way of the left’s anti-technology narrative. The author also fails to mention that most of San Francisco often doesn’t allow residential building rise higher than four or six stories, making it hard to accommodate a lot of people at low cost. Instead, thanks to policy enacted by liberals, workers who cannot afford to live in the city are forced to commute for hours. Whether it’s bank bailouts, high tuition, or the lack of affordable housing, the left is often responsible for the problems they complain about.

I went to school with Bill. He’s a nice guy. But making him immortal is not going to make life better for anyone in my city. It will just exacerbate the rent crisis.

The left also fails to understand that capitalists want to make technology accessible, provided they can turn a profit – and sometimes they still do so at a loss. Making Bill immortal, which I’m highly skeptical is possible, will open the door to making more people immortal.

Here’s Elon Musk.

In a television interview this week, Musk said: “I’m trying to do useful things.” Then he outlined his plan to detonate nuclear weapons on Mars.

These people are the face of our industry.

Another shot by the left at great capitalist Elon Musk. Some on the right say that the left loves Elon Musk…hardly; the left whines constantlyalleged crony capitalism, as well as attacks on Mr. Musk himself. In 2013, with an intentionally botched ‘review’ of the Tesla roadster, the NYT tried, and ultimately failed, to defame Tesla:

Recall in 2013 the increasingly irrelevant liberal rag The New York Times tried, with much desperation and futility, to defame Tesla and Elon Musk in an editorial where avowed liberal auto reviewer John M Broder deliberately ran his test Tesla out of electricity in order to write a bad review. Tesla stock was trading at $40 at the time; it’s now at $210, to the chagrin of the liberals who wanted to see Tesla fail, and another defeat for the wealth spreading left in their war on success and capitalism.

But, also, let’s face it: It’s a great time to be rich and smart, especially in the Silicon Valley. This is the new ‘enlightenment’ or ‘renaissance’ before our eyes, on our phones, at Caltech and MIT, online, and at the molecular level with the second biotechnology boom.

Peter Thiel has publicly complained that giving women the vote back in 1920 has made democratic capitalism impossible.

He asserts that “the fate of our world may depend on the effort of a single person who builds or propagates the machinery of freedom that makes the world safe for capitalism.”

I’m so tired of this shit. Aren’t you tired of this shit?

I’m not tired of this ‘shit’; we need more people to speak up against the failure of democracy, suffrage, and political correctness. Peter Thiel is right. Look at how Obama got the majority of the female vote and what a disaster that has been. The problem with democracy is people voting to expand the welfare state and, second, people voting on charisma, not policy, both of which helped Obama get into office against the more experienced and competent Hillary, Romney, or McCain.

Let’s look at the data. In 2005, Larry Summers was infamously forced to resign from his post as president of Harvard for merely stating what many suspect to be true but are afraid to say: women tend to be underrepresented in STEM due to cognitive differences at the ‘high end’, or according to his full statement:

“It does appear that on many, many different human attributes — height, weight, propensity for criminality, overall IQ, mathematical ability, scientific ability — there is relatively clear evidence that whatever the difference in means — which can be debated — there is a difference in the standard deviation, and variability of a male and a female population. And that is true with respect to attributes that are and are not plausibly, culturally determined. If one supposes, as I think is reasonable, that if one is talking about physicists at a top 25 research university, one is not talking about people who are two standard deviations above the mean. And perhaps it’s not even talking about somebody who is three standard deviations above the mean. But it’s talking about people who are three and a half, four standard deviations above the mean in the one in 5,000, one in 10,000 class. Even small differences in the standard deviation will translate into very large differences in the available pool substantially out.”

Although men and women have roughly the same mean IQ (around 100), they differ in variance, in that women have a smaller variance than men, and hence there are fewer ‘genius’ IQ scores among women, which can explain the gender gap in the sciences.

From Brietbart: SCIENTIFIC PROOF THAT PUBLIC DEBATE IS DOMINATED BY STUPID PEOPLE

The funny thing is this is from Britbart London…Americans, who are too brainwashed by political correctness, including even the right, won’t touch the subject of HBD, but the Brits will. The Enlightenment, which brought evolutionary science to the forefront, originated from Western Europe, not America. Boris Johnson, the mayor of London, said what American politicians are too spineless to admit, and predictably the left was outraged that someone would make an inference between IQ and socioeconomic outcomes. That would mean that some people are born ‘better’ than others, in refutation to the left’s belief in the ‘blank slate’, limiting the effectiveness of wasteful taxpayer-funded liberal social policy to create equal socioeconomic outcomes.

As shown below, women tend to dominate low-IQ majors, in agreement with Summers’ statement:

And women have less variance of IQ scores:

The same liberals who insist that sexuality is biological or that humans are causing global warming refuse to accept the science of gender as it pertains to cognitive ability. Again and again, the ‘pro science’ left picks and chooses the science they want to believe in, rejecting all the science that doesn’t agree with their egalitarian, ‘blame the rich’, blank-slate worldview. Putting people of average of below average IQ in positions of power, or giving such individuals power over high-stake outcomes, is why there is a ‘war on boys’ in the public schools, why there was a financial crisis, and why Obama was elected – twice.

The fate of the world may not depend on a single person, but maybe a handful of smart people who create the technologies that advance civilization, which from the caveman who tamed fire to the scientists who are harnessing hydrogen fusion, is the same as it ever was.

How the left spreads misinformation, fear, and bad advice to ‘save/protect’ people

In their war on the ownership society, the left wants people to rent instead of owning homes. Because so much wealth is held in real estate, one way for the left to accomplish their goal of making society poorer is to get people out of homes and into rentals by spreading misinformation about real estate either being a scam and or a bubble. Yet at the same time, the left also wants deadbeats to keep their homes. People who can afford to buy a home should never own one, but those who can’t should never be evicted, according to the left’s ‘logic’. It’s contradictory, but liberalism is a mental disorder.

Same goes for liberals who call traditional publishing evil and exploitative, oblivious or ignoring the fact that traditional book publishing houses are flooded with manuscripts, so apparently, I guess, despite thousands and thousands of articles slamming traditional publishing, word still hasn’t gotten out about how ‘evil’ traditional publishers are. Just another example of the paternalist left acting like they know what is best for everyone else, giving bad advice to ‘save’ people. According to the left, it’s not your fault your precious manuscript was rejected, it’s those greedy corporations and rich people who are to blame.

The average Amazon self-publisher makes a couple hundred dollars a year and that doesn’t include costs such as covers and editing, whereas 6-figure or 7-figure book publishing deals are not all that uncommon. For example, memory champion Joshua Foer received a jaw-dropping $1.3 million advance from Penguin to write his critically acclaimed debut book Moonwalking with Einstein. Poor guy. But of course, we can’t let obvious counter-examples stand in the way of the well-worn leftist narratives that ‘traditional publishing is dead’, ‘traditional pubishing gatekeepers are suppressing talent’, or ‘traditional publishing exploits authors’.

Bloggers like Mike, Aaron, Vox, and James are successful with self-publishing because they already have huge audiences. They wrote books only after becoming well-known through blogging and other mediums; they didn’t self-publish to build the audience – the audience was already there. Traditional publishing, on the other hand, puts the books in front of people’s eyes at the bookstores and on Amazon through professional promotions, which helps authors who have the talent to write quality work but have little or no pre-established audience. The audience is what matters – no audience, no sales. Period. The left doesn’t understand this fundamental rule.

Or the left spreading FUD about stocks being a bubble or about the fed inflating the market – nevermind that companies like Amazon, Facebook, Google and Apple, which have nothing to do with the fed, keep posting blow-out earnings year after year. The welfare left thinks that the fed was evil to bailout Wall St. and should have just let everything crash and burn to save people from ‘moral hazard’. The only conspiracy is not from the fed or the government, but from the libs who are making you poor by making you sell your stocks too soon or piss money every month to the landlord, all under the pretense of trying protect people from imagined fears. Fear of publishing houses, fear of stock market bubbles, fear of the fed, fear of China, fear of rich people, fear of housing…and the list goes on and on.

Related: Is James Altucher Right About Never Buying a Home?