A friend who works at a bank just sent me this:
Above is a graph of Japanese housing prices between December 1989 and December 2004. You can see that it’s down about 60%. In October of 2004, Alan Greenspan said “While local economies may experience significant speculative price imbalances, a national severe price distortion seems most unlikely.” His rationale for this was that housing prices had never declined significantly year-over-year in the United States. But ignoring what happened in a very similar economy, Japan, was remarkably naive.
It’s easy now to forget the kind of respect Greenspan was accorded. Bob Woodward wrote a book about him, titled Maestro, John McCain proposed making him fed chair for life, Bill Clinton strongly supported his reappointment as fed chair, and we were inundated with tales of how he made his decisions by examining economic data while in the bath tub.
This is why I tend to think that all the scrutiny of Geithner and Summers is a good thing. The recapitalization plan may work perfectly, but there’s a tremendous danger in seeing them or anyone else as all-knowing Randian geniuses who magically absorb economic wisdom in the bath tub.
Update. Dennis reminds me of this McCain quote on Greenspan from 2007:
Republican John McCain said Thursday that as president he would appoint Alan Greenspan to lead a review of the nation’s tax code – even if the former Federal Reserve chairman was dead.
“If he’s alive or dead it doesn’t matter. If he’s dead, just prop him up and put some dark glasses on him like, like ‘Weekend at Bernie’s,'” McCain joked. “Let’s get the best minds in America together and fix this tax code.”
Best minds. Top men.
Ned R.
For the Gang of Four reference alone, I thank you.
DougJ
Entertainment may be the most underrated album of all time.
Dennis-SGMM
Greenspan: My mind is a raging torrent, flooded with rivulets of thought cascading into a waterfall of creative alternatives.
Andrea Mitchell: He’s really smart you know.
Little Dreamer
@Dennis-SGMM:
I believe that is: ‘I wouldn’t have gotten anywhere near as far as I have in this business without being married to him, you know.’
grumpy realist
Ah, an unknown masterpiece by Hokusai: Blue Fuji, reversed.
MikeJ
Greenspan will get you like a case of anthrax, and that is something that i don’t want to catch.
Or maybe I should just have a cocktail now.
DougJ
Yeah, I was thinking the same thing!
Dennis-SGMM
@Little Dreamer:
Fuckin’ A. Another product of the Cokie Roberts “My intellect is mediocre and my insights are banal but it doesn’t matter because I’m an insider,” school of anti-journalism.
Dennis-SGMM
@DougJ:
Ton demo nai! It’s Hokusai’s “The Wave.”
Walker
We will be lucky if we fare as well as Japan. They actually had savings before the crisis.
This is why I don’t think I am going to by a house this year. The prices have a long way to fall — even in areas that did not go up that high. In my case, my university is the only real employer in the area, and there are not going to be any major hires for at least 2 more years. This is going to be brutal summer for housing.
CrazyNewfie
Well, Japan’s population is shrinking. Some comparisons are valid I think, but they have a whole host of other problems we don’t on top of that.
flounder
Luckily, I see them as people I want to be forced to watch as us pitchfork wielding crowds start burning their precious little banks down.
HitlerWorshippingPuppyKicker
{ voice of Jerry Seinfeld }
{ clenched teeth }
Woodward!
Fulcanelli
True DougJ, it is easy to forget. So let’s help him take a nap with the fishes now that we’ve all forgot and maybe give his old lady one too and we’ll be on our way to cleaning up two professions.
Dennis-SGMM
@flounder:
Is there no tar?
Are there no feathers?
Keith
On the subject of Greenspan worship, there’s one quote from the Clinton era that sticks in my mind, and I’m mangling it a bit, “If Greenspan dies, we’ll dig up his body and nominate that for next fed chairman”
Dennis-SGMM
Here’s how smart that son of a bitch is:
“American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.”
Allen Greenspan – Speech to the Credit Union National Association Conference, 2004
Anoniminous
Baloney
Like all good Students of Objectivism®, Greenspan ignores facts when it doesn’t fit his philosophy™.
DougJ
You’re right — what was he referring to then?
JerseyJeffersonian
Not Great Men
Gang of Four
No weak men in the books at home
The strong men who have made the world
History lives on in the books at home
It’s not made by great men (3X)
The past lives on in your front room
The poor still weak the rich always rule
History lives on in the books at home
It’s not made by great men (3X)
The past lives on in the books at home
No weak men in the books at home
History lives on in the books at home
It’s not made by great men (3X)
(Right from the sleeve of my treasured 33RPM LP…)
And remember the song Ether from the same album; Britain’s own little escapade into torture during the Troubles. Thanks to our deeply ingrained belief in American Exceptionalism, we didn’t learn anything from that horror.
So much for Randian greatness. Sic transit gloria mundi, motherfuckers.
asiangrrlMN
Motherlovin’ Randian asshole.
Anoniminous
@DougJ:
Who the hell knows.
Greenspan liked cover his pish-tosh in a cloud of verbal haze.
Edited to add: He would just string words together whether they had any Truth Value or not.
Anne Laurie
You stole my line. But I’m still afraid of what the American version will look like… the Devil’s Tower? A view of the Grand Canyon? Right now, it reminds me of one of those post-Civil-War ‘School of New York’ landscapes with a couple tiny black-clad figures trying to measure the immensity of a fogbound mountain wilderness.
asiangrrlMN
I hate Andrea Mitchell, too. Please let her go Galt with Greenspan.
OriGuy
@Dennis-SGMM:
Blazing Saddles just never stops being appropriate, does it?
grumpy realist
“O-nami” nattara, nami wa doko desu ka?
(Oookaaay….just how many nihongo-speakers do we have on this blog, anyway?!)
If anyone decides to graph CA or FL prices against time, it’s probably more like Cleopatra’s Needle…
Prices here in Chicago are going weird. Sudden drop of prices in many locations, although I think what we’re seeing is a) low volume coupled with b) desperate sellers taking anything they can get. Everyone else has taken their stuff off the market and is waiting this sucker out.
Mike in NC
Tweety is reporting that wingnut governors Perry and Sanford are organizing another round of teaparties. Woohoo!
Rick Taylor
Paul Krugman praised him, even when he also criticized him for giving the Bush administration cover for its tax cuts.
Anoniminous
From the primordial ooze John McCain, and his three functioning neurons, arises to – Yet Again – make an ass of himself.
Nylund
Well someone has to link to the song now don’t they? Or, if you prefer, live in 1980.
asiangrrlMN
@Mike in NC: By phone. They are doing this round by phone. The mind boggles.
eemom
Greenspan was Ayn’s boytoy in real life, ya know. Thus, hideously toadlike as he is, was probably regarded as some sort of sexual role model by generations of dysfunctional teenagers destined to Wall Street thugdom.
Little Dreamer
@CrazyNewfie:
Obama’s got enough on his plate, thank you!
asiangrrlMN
@eemom: Ew. I need to go take a shower now.
DougJ
I totally agree.
But to say our housing prices could never go down after theirs went down 60% was nuts. Though I don’t think ours will go down 60% when all is said and done (I think 40% at the most).
aarrgghh
capital (it fails us now). why theory? natural’s not in it. history’s bunk! to hell with poverty. i found that essence rare. what we all want. if i could keep it for myself.
in the ditch. damaged goods. a hole in the wallet. return the gift. the history of the world.
he’d send in the army. at home he’s a tourist. it’s her factory. guns before butter. outside the trains don’t run on time.
i will be a good boy. call me up. i love a man in a uniform. not great men. is it love? we live as we dream, alone.
2th&nayle
@HitlerWorshippingPuppyKicker: Perfect imagery! Too bad you couldn’t put “CIA Shit Weasel’ in there somewhere.
AhabTRuler
Yer darn tootin’, Patty!
srv
My only regret is that Milton didn’t live long enough to see his “free market” legacy obliterated. I do wish Alan good health, so the school kids can point and laugh at him for a long time.
Mnemosyne
Atrios linked to this story in next week’s New York Times Magazine that simultaneously depresses me and makes me glad we didn’t put ourselves in hock for a mortgage.
The Los Angeles area seems to be this weird combination of vacant houses and vacant apartments. It looks like people who overextended themselves on condominiums are now renting them out and flooding the market for rentals. It’s pretty much the opposite of the way it’s “supposed” to work, where rental vacancies go up when there are a lot of houses on the market (because everyone’s buying a house).
Our city also has a ton of empty commercial space available, and had something like a 20% vacancy rate even before the crash.
D0n Camillo
I’ll give him points for having good personal hygiene. That’s so important in a Fed chairman. As for the fact that he actively encouraged people to take out adjustable rate mortgages, I’m afraid I’m going to have to subtract points for that. A shitload of points. I don’t care how often he bathes, he’s never washing the stink off.
TenguPhule
In the middle of Death Valley. In the summer. During a drought.
Chuck Butcher
I believe I’ll leave you all to it, I’m going to take a Harley putt for a couple days.
DougJ
Have fun. And be careful — motorcycles are not so safe.
R-Jud
@Anne Laurie:
Bit like this, I should think.
@grumpy realist:
O RLY? We are about to finish paying off the mortgage here; if we could sell up and move back stateside on the cheap, especially to Chicago, that would be sweet.
WereBear
I don’t think Commercial will ever come back.
Not that it will ever go away entirely. But there just isn’t the push when you can have a Virtual Reality store on the Internet,
Add in rising cost of transport, and we’ll see them turned into the New Loft Apartment.
someguy
It’s good to see the reich wing capitalist, libertarian, and free trade myths all take it in the shorts in the same week. Doesn’t work, assholes! Time to try something new.
aimai
I always thought the respect accorded these guys–Milton Friedman, Alan Greenspan, was something just bizarre. Not funny, I’ve run out of the funny, but just bizarre. The whole thing, the last ten or fifteen years of Greenspan worship, reminds me irressistably of scenes from the “Fog of War” and the naive, masculinist, fascination with the nerdy guy with no personality, the technocrat. It seems so alien. With the exception of Ayn Rand I never see a woman granted that kind of reflexive, unthinking worship. But maybe rand is bad enough.
aimai
kay
I think people like Greenspan really screwed the pooch. Something profound has shifted. The people I talk to feel as if they’re in the trenches, their family versus the lenders. That was inevitable, I think, when you combine the practical effects to individuals of the financial crisis with the complete lack of accountability or apology by the people who sold this easy-credit dogma.
What has consistently amazed me is how the lending industry has offered no concessions, no solutions, and appear to believe they have no responsibility to do so.
Taking a hard line with debtors who have no job and no assets probably wasn’t a good business decision. The debtors have nothing left to lose, but the lenders do.
I would have made a deal, had I been a lender and the economy collapsed. I would have bent over backward to keep people in their homes, and their cars, and making payments, even if I was taking a hit, because 60% is better than nothing.
Lenders chose not to. They’re going to end up with pennies on the dollar, because people who aren’t working can’t pay.
Ash Can
@kay: Even the lenders are walking away from foreclosed houses.
joe from Lowell
Time at the Fed, I spent it well
I hand to be strong for the party.
Montysano
Wow, DougJ and others; thanks for recommending Gang of Four! Somehow I’d missed them all these years. Punk-ish music with funk, and with real musical skill. I just downloaded a few tracks from Entertainment, and will grab the whole thing later from iTunes.
kay
@Ash Can:
Thanks.
Maybe I’m not as smart as the finance people, but it makes zero sense to me.
When it gets down to it, and people perceive this as saving their family or saving a credit score, lenders thought they were gonna win that fight?
People are in real trouble, jettisoning, and prioritizing, and bankers are just not first in line. Talking to people who are underwater, or upside down, or loaded up with credit card debt, and unemployed, the language they use sounds radical, as if their whole perception of Our Finance Sector has shifted, and not in a good way.
That’s true for me. I perceive lenders as adversaries. That’s new for me. I sort of bought into the system prior to witnessing this melt-down. and I’m employed and can pay my debt.
Jon Parker
Gang of Four +++++++++++++
Caught them twice on their reunion tour a couple years ago. They’re still fantastic.
Roger the Cabin Boy
Sounds like he might have been examining his schmok instead. Nude pictures of Ayn Rand might also have been involved.
Craig
When an idealogy like Ayn Rand Objectivism fails, its supporters never find fault with the idealogy itself. The fault is always with an outside influence. “The Wall Street free market wasn’t a *true* free market because the federal government forced mortgage lenders to sell to people who wouldn’t be able to repay.”
DougJ
They’re great, aren’t they? Be sure to check out “Damaged Goods” and “I Found That Essence Rare”. Great songs.
Dennis Doubleday
I’m not sure Japan’s example is a good parallel in this case. Japan is a small, densely populated country. Real estate prices rose dramatically and much more homogeneously than they have in the US, and so they have come down nationwide, too. The inflation/deflation was and will be less general in the US.
jcricket
@Dennis Doubleday: With a homogenous ethnic population, strict cultural norms around “shame” that prevent “creative destruction” like we have in American-style capitalism and draconian immigration laws that prevent skilled workers from other countries from becoming citizens and/or owning anything.
But otherwise, Japan’s exactly like the US.
Roger the Cabin Boy
Apologies for the double post, I was told that my first one had been flagged as spam. Could the powers-that-be please delete my first post? The second one has the better pic of Ms. Rand.
DougJ
@Roger
Done.
Dennis Doubleday
@jcricket: Not sure what your comment has to do with anything I said. The subject of the post was the Japanese real estate market, and whether or not it tells us anything about our real estate market. I said nothing about culture.
priscianus jr
Man, that graph looks like the 25th way of looking at Mount Fuji.
Interrobang
Kay — It’s funny, you’d think that lenders would be happy with 60% instead of 0, but I’ve been on the hook with these types in the past (granted, in Canada, over student loans and stuff), and a lot of them seem to magically figure that if they just harass you enough, somehow magically pink unicorns carrying wads of cash will materialise in your presence. I dunno, maybe they find that intimidating people works in a lot of cases. I just kept telling them “You can’t get blood from a stone.” I had one particularly obnoxious type ask me if there was someone else from whom I could borrow the money to make the payment, and I said, “Look, I’m so broke right now that if I had anybody I could borrow money from, I’d be using that money to buy groceries, not paying off your stupid bill.”
Apparently they think debt is infinite or something — if you can’t pay off one creditor, just borrow from another. Funnily enough, they get a little annoyed when you’re robbing Peter to pay Paul and they get cast in the role of Peter…
omen
nothing to add. just struck by how the graph suggests a japanese painting.
Jess
Wow! All these closet Gang of Four fans–who knew! Listening to Songs of the Free non-stop when I was 19 almost drove me to jumping off a bridge. Great stuff.
What an erudite thread we have here, in a geeky kind of way. Y’all never fail to impress me!