Saturday, August 18, 2007

Ron Paul's Statement on the Housing Bubble

Here is presidential-hopeful Ron Paul explaining that the Fed's intervention in the economy is ultimately responsible for the housing bubble, not capitalism, not supply-and-demand, and not (directly anyway) lenders.
But capitalism is not to blame for the housing bubble, the Federal Reserve is. Specifically, Fed intervention in the economy-- through the manipulation of interest rates and the creation of money-- caused the artificial boom in mortgage lending.

The Fed has roughly tripled the amount of dollars and credit in circulation just since 1990. Housing prices have risen dramatically not because of simple supply and demand, but because the Fed literally created demand by making the cost of borrowing money artificially cheap. When credit is cheap, individuals tend to borrow too much and spend recklessly.

This is not to say that all banks, lenders, and Wall Street firms are blameless. Many of them are politically connected, and benefited directly from the Fed’s easy money policies. And some lenders did make fraudulent or unethical loans. But every cent they loaned was first created by the Fed.

The Federal Reserve provides the mother’s milk for the booms and busts wrongly associated with a mythical “business cycle.” ...Unless and until we get the Federal Reserve out of the business of creating money at will and setting interest rates, we will remain vulnerable to market bubbles and painful corrections. If housing prices plummet and millions of Americans find themselves owing more than their homes are worth, the blame lies squarely with Alan Greenspan and Ben Bernanke.
Nothing new here. But I have been glad that at least one potential candidate hasn't been afraid to deal with the truth and say it like it is. Of course, that probably means he won't win; but he has my vote anyway.

5 Comments:

Blogger marin_explorer said...

"The Fed has roughly tripled the amount of dollars and credit in circulation just since 1990."

Back in the 90's, I recall a finance consultant warning of an inevitable credit contraction. Now, it appears we have intl. markets awash in liquidity, but with few willing to publicly describe the possible downside. Yet we hear the pundits foretell how a little more money injected into the system will tide over Wall Street's recent hiccup? If excessive liquidity created these problems, how exactly will it turn things around?

I'm no expert in these matters, but I smell a fiasco brewing that is greater than real estate or sub-prime lending. Perhaps I'm stating what is obvious, but I'll the average American consumer hasn't a real clue to the depth of these problems, possibly because they've deferred their own fiscal indiscretion for years.

Aug 18, 2007, 2:40:00 PM  
Blogger Matthew said...

From all I've read, Ron Paul has this thing more closely figured out than any other candidate, but he's not getting my vote... Sorry, I've had my fill of Texas politicians for a while...

Although I agree w/him on this issue and on immigration, he's off his rocker on a few other issues as far as I'm concerned... I think he's only on his first wife, so I don't think he stands a chance of getting that GOP family first vote.. (sorry, couldn't resist)

On this subject, a quote below from Ben's blog..

“Other industry experts say it’s already too late – that even locking in a loan doesn’t guarantee financing. ‘I’ve been hearing the most heart-wrenching stories in my 21 years in this business,’ said Jeff Lazerson, president of Laguna Niguel-based Mortgage Grader.”

I read quotes like this and can only imagine the pain and heartache out there right now... it pisses the hell out of me... I find no joy in reading this knowing that there are real lives behind these stories that are being ruined or have been ruined by this bubble and scam of all scams.... sure, these owners are certainly partly to blame, but the "professionals" who profited the most from them are the real scum here….

All this pain and heartache created by the RE machine because of their short, simple, greed infested mindset... screw them all..

rant off..

Matt

Aug 18, 2007, 2:53:00 PM  
Blogger South Florida Housing Bubble said...

I added an interview with Ron Paul where he talks about the housing bubble on my blog. It's along the same lines as the statement, but it's good to hear him speak.

Here's a link:

http://southfloridahousingbubble.blogspot.com/2007/08/video-presidential-candidate-ron-paul.html

Aug 18, 2007, 4:47:00 PM  
Blogger Holland said...

Do you know the following fact?

Angelo Mozilo, CEO for Life, of Country Wide has sold CFC stock totaling
$536,348,378.00 in the last 2 years alone (1.3 mill between 8/2-8/9)

Wouldn't it be nice if he covers the loss of CFC from his own pocket? Or this is another Enron happening in front of our faces?

Aug 18, 2007, 5:15:00 PM  
Blogger Hostech said...

This comment has been removed by a blog administrator.

Aug 21, 2007, 11:21:00 PM  

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