Posted by Todd Zywicki: Did the Fed Cause the Housing Bubble? http://volokh.com/archives/archive_2009_03_29-2009_04_04.shtml#1238374396
I was traveling over the weekend and so didn't get a chance to post on Friday about my latest piece in the WSJ, a contribution to an Editorial Page symposium on [1]Alan Greenspan's argument a few weeks ago that the Fed didn't cause the housing bubble. My argument that the Fed did is in the WSJ, [2]"Low Rates Led to ARMs". It is about halfway down the page. Some readers will remember that during the fall I posted [3]here the chart that provides the data that I summarize in my Friday column. In a nutshell, the economic argument is that the substitution by consumers of ARMs for FRMs provides the economic mechanism for Federal Reserve short-term monetary policy to affect housing prices that both Greenspan and John Taylor had not discussed. Greenspan focused on the constancy of the 30-year rate and Taylor focused on the interest rate without providing a mechanism for converting short-term rates into housing prices (which was Greenspan's basic response to Taylor). References 1. http://online.wsj.com/article/SB123672965066989281.html 2. http://online.wsj.com/article/SB123811225716453243.html 3. http://volokh.com/archives/archive_2008_10_19-2008_10_25.shtml#1224958881 _______________________________________________ Volokh mailing list Volokh@lists.powerblogs.com http://lists.powerblogs.com/cgi-bin/mailman/listinfo/volokh
