By Economist Peter Schiff                                                                                     

In an interview yesterday on CNBC, former Fed Chairman Alan Greenspan cast his eyes on the charred landscape of the national real estate market and offered high-minded criticisms of the obvious excesses and irrationalities that brought on the devastation. Greenspan's attitude was akin to a retired drug dealer lamenting the urban blight caused by rampant addiction. He noted that housing prices were still too high, that too many homeowners were upside down on their mortgages, and that Fannie Mae and Freddie Mac were accidents waiting to happen. Methinks the serial bubble blower doth protest too much.

The housing bubble was Greenspan's doing pure and simple. He gave birth to it, nurtured it, protected it, and guided it during every stage of its development. In fact, if there was a deck of playing cards featuring the key players in this debacle, Alan Greenspan would be the ace of spades. The fact that the media still holds this joker in such high esteem is a testament to just how clueless they are. Rather than fawning over his every word, journalists should be grilling him like a CIA interrogator.

In his new post-Fed incarnation, Greenspan does show an increased willingness to speak the truth ... perhaps sharp candor generates higher speaking fees the murky academic jargon. However, conveniently missing from his belated admission that home prices are too high is that his irresponsible monetary policies propelled prices to those heights in the first place. In fact, even as the housing bubble was inflating, Greenspan repeatedly denied its existence. He took every opportunity to talk the real estate market up and went out of his way to justify irrationally high home prices.

His concerns about upside down mortgages are particularly offensive given his consistent praise, when he was Fed Chairman, of the ability of home equity extractions to fuel economic growth. In fact, during the final years of his tenure there was no greater proponent for cash out re-financing than Alan Greenspan. Not only did the Maestro routinely commend homeowners for their sophisticated approach to "managing their home equity", but he applauded Wall Street and mortgage lenders for their creativity and ingenuity. Of course, home equity extractions are largely responsible for so many homeowners now owing more than their homes are worth!

His most brazen contention was that he had tried to warn us of the dangers that Fannie and Freddie could pose to the entire economy. Excuse me, but when exactly did he sound this alarm? His points that Fannie and Freddie should not exist, and that the moral hazard of private profits and socialized losses is an accident waiting to happen would have been right on point had he actually made them while still Fed Chairman. Too bad Maria Bartiromo did not remind Greenspan that the accident has already taken place. Fannie and Freddie's flawed design may have rendered them destined to slip but it was Greenspan himself who supplied the banana peel.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book "Crash Proof: How to Profit from the Coming Economic Collapse."

 

 

 

August 2, 2008: Annemaria Allen CEO Of The Compliance Group 

 

 

 

 

(Sep 18, 2007)- "If the dollar loses value too quickly, it could wreak havoc on the economy and financial markets - driving up interest rates and inflation and slashing Americans' purchasing power" -Peter Schiff 

 

(Sep 19, 2007)- "People keep talking about Fed bailouts as if there is no cost. All the Fed can do is create new dollars. What that does is diminish the value of all the dollars everybody already has. They try to socialize the losses among all the holders of dollars" -Peter Schiff

 

July 30 -  Inflation in the US could hit 6 per cent by the fall, CIBC World Markets' chief economist said on Wednesday. Consumer prices for June were up 5 percent from the year before, the fastest one-year change since 1991. Jeffrey Rubin, chief economist of Toronto-based investment bank CIBC, predicts a 6 per cent rate for overall inflation, a level last seen in 1982. His reasoning: Increased shipping costs are making goods produced in the United States more competitive with goods shipped from China. ``High energy prices give American manufacturing workers bargaining power that they have lacked for over a decade, while at the same time encouraging them to ask for larger pay raises to keep pace with the soaring price of gasoline............................

(Aug 16, 2007)- "The housing bubble has burst. Prices are going to collapse and sales are going to fall through the floor." -Peter Schiff 

 

July 30 -- More than 800,000 vacant homes for sale stand between the national housing recession and the bottom. And that glut is driving down home prices, slowing sales and turning consumer psychology against the market. New figures out Tuesday showed home prices fell by a record 15.8 percent in May from a year ago, with none of the 20 cities surveyed registering a price gain. The Standard & Poor's /Case-Shiller Home Price Index is down more than 18 percent from its peak in July 2006. The metropolitan region, which includes Long Island, New York City and parts of New Jersey, Connecticut and Pennsylvania, posted a 7.9 percent decline from a year ago and a .5 percent drop from April, according to the index. The metro region's year-over-year drop was not as precipitous as April's 8.4 percent decline, the biggest for the year so far, and the New York area held onto prices much better than more than half the 20 cities on the list. "The key thing is the number of unsold homes out there," said Patrick Newport, a economist at Global Insight. "That number has to come down significantly before things can get better." And that won't be until 2010, he predicts..................................


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(Sep 21, 2007)- "With the Federal Funds Rate cut, the Fed revealed that it has no interest in defending the dollar or containing inflation. This kind of irresponsibility is all gold needs to move higher from its current levels unless the Fed somehow finds its backbone within a year or two, then gold has a good chance to take out its inflation-adjusted high of nearly $2,000 per ounce within this decade." -Peter Schiff

 

 

(July 31, 2007)- "It's going to soon hit $90 and go north of $100 next year. We should see $150 to $200 oil in the next two to three years because of the drop in the dollar.'' -Peter Schiff