In his best impression of a depression-era keynesian, Bernanke is now saying that the problem with the economy is that housing prices are falling:
While everyone else in the world is focused on the policy implications of today’s speech from Fed chair Ben Bernanke, I want to talk about his analysis of the economy.
Basically, Bernanke told us today that the economy has been lagging because home prices keep falling.
“Notably, the housing sector has been a significant driver of recovery from most recessions in the United States since World War II, but this time—with an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by both potential borrowers and lenders about continued house price declines—the rate of new home construction has remained at less than one-third of its pre-crisis level. The low level of construction has implications not only for builders but for providers of a wide range of goods and services related to housing and homebuilding.”
Please don’t think that guys like Bernanke are somehow clueless of real economics. He’s just a court historian. He knows what he just said there is BS. He’s simply taking the Greenspanian approach of talking in economic-greek so that people will marvel at how smart he sounds. It took him three paragraphs to say that housing prices are too low and new home construction is weak. Well, guess what makes people buy more homes Ben? Lower home prices. You can’t have high home prices and robust construction at the same time unless you’re in an unsustainable real estate bubble. That must be what ol’ Ben is getting at. He wants to re-inflate the bubble.