I would like to make a couple of comments regarding the speech Ben Bernanke gave on January 3. It was titled “Monetary Policy and The Housing Bubble.” (pdf)
I could make a significant amount of comments regarding this speech, as I partly or fully disagree with many of the points presented.
I will, however, briefly comment on a couple aspects of the speech. First, from page 21:
“Although the house price bubble appears obvious in retrospect–all bubbles appear obvious in retrospect–in its earlier stages, economists differed considerably about whether the increase in house prices was sustainable; or, if it was a bubble, whether the bubble was national or confined to a few local markets.”
I agree with the general premise that bubbles aren’t always obvious. As I said in my December 2 post, “Some bubbles are harder to spot than others.” As far as the housing bubble was concerned, in my opinion it was a relatively easy bubble to identify as it occurred, based upon a variety of characteristics.
Second, from page 22:
“That said, having experienced the damage that asset price bubbles can cause, we must be especially vigilant in ensuring that the recent experiences are not repeated. All efforts should be made to strengthen our regulatory system to prevent a recurrence of the crisis, and to cushion the effects if another crisis occurs.”
I think it can be strongly inferred from this excerpt, as well as other statements that he has recently made, that he doesn’t believe there are asset bubbles currently in existence. My analysis indicates otherwise, as I discussed in my December 2 & December 16 posts.
SPX at 1136.43 as this post is written