July 10, 2009 – 2:52 pm

The US Federal Reserve, recently outed as the villainous culprit of the Dot Com Bomb and the current credit crisis, is shifting blame for the housing collapse. In a classic move of “Fedicism,” the central bank has hired one of its own to do provide academic cover for their theft. And let me tell you, the result is hilarious!
Former Fed member James Kahn’s paper puts the blame for the housing bubble squarely on the shoulders of the American people. With bubbles popping everywhere, Mr. Khan attempts to con you into believing a productivity bubble caused the housing crisis. Nothing could be further from the truth.

Lax lending standards alone did not bring about the housing bubble, according to a study by the New York Federal Reserve, challenging the widely held view of the origins of the collapse in home prices.

The study released on Thursday argues that swings in labor productivity played a significant role in the rapid growth and subsequent steep drop in house prices.
Consumers thought that because they were working harder starting in the mid-1990s, their paychecks would follow suit, encouraging them to pay high prices for housing, the study found.
Obviously, any scapegoat will do. Yes, American workers were more productive beginning in the mid-1990s, but the bubble was inflated by loose monetary policy at the Fed and lax lending standards. The well-known scam was to frontload the profits, backload the expenses and offload the losses to the next guy.
Lenders are supposed to have lending standards to protect them from making bad loans, but somehow the lenders were forced to make the bad loans to stupid people making more money than they deserved and applying for loans to buy houses they couldn’t afford. Oh, okay. I get it now. Get real.

The optimism continued until 2007, when evidence of a slowdown in productivity helped quash the rosy view and with it the housing boom.

Angelo Mozzilo, I had you wrong all along. Gosh, all this time I thought you were a fraudster.

Understanding the link between productivity — output per hour of work — and house prices could help inform policy decisions, said James Kahn, the study’s author.

“The current housing crisis stemmed in large measure from a change in economic fundamentals and was only exacerbated by credit market conditions,” Kahn, a professor of economics at Yeshiva University wrote in the Federal Reserve Bank of New York’s Current Issues in Economics and Finance journal.

“Indeed, what appear in retrospect to be relatively lax credit conditions in the early part of this decade may have emerged in part because of then-justifiable, although ultimately misplaced, optimism about income growth,” he said.

Better understanding of what was behind the current housing crisis could help policymakers gauge the impact that credit market interventions have on the housing market, Kahn said.

Let me help you understand what’s going on here. The Fed inflated the money supply, which means the guy working productively must work harder because his money now buys him less. The effect on housing prices is as predictable as 2+1 = 3.
Watch this new math:  print lots of money + hand it out for free for people to speculate in the real estate market = prices go up and make a bubble that will crash. Holy shit, I just summed up the entire class on monetary policy that happened over the last ten years.
In case you missed the class, here’s a recap:  paper money printing press + evil people = you lost your house and your job.
But according to the Kahn job over at the Fed, this is the reality:

The link between productivity and the housing downturn could also offer insight into when house prices will stop falling.

If productivity growth reverts to the higher rates seen between 1996 to 2004 and between 1947 to 1972, the model used by the study suggests that housing prices will bottom out and begin growing again faster than overall inflation.

James, decouple from the fantasy that increased productivity caused the housing bubble. For one, it’s stupid. For two, you’re supposed to be an economist, but you sound like a dumbass.
Also, James, you are putting the cart before the horse. If housing prices bottom, then productivity growth will revert to higher rates.  Finally stop lying, it makes you sound stupid.

And even if productivity growth remains slow, the model would imply that housing price declines will ease. But it also suggests that prices could continue to fall modestly on an inflation-adjusted basis, as they did in the 1980s and 1990s, Kahn said.

Dumb Dumb! I just told you productivity growth will remain slow until housing prices bottom. Prices will continue to fall until the government stops trying to prop them up, along with every aling and failing bank with rotten paper riding on the mortgages. Your Fed created so much of its own paper that a potted plant could get a mortgage.
Kahn was a vice president at the New York Fed at the time the article was written.
Meaning that the Fed had to stay in-house to find someone to say with a straight face that too much productivity created the housing bubble. I am not surprised.
In other words, if we all sit on our ass and make productivity go down, the problem should get better.
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