Ludwig von Mises Institute

Austrian predictions/Housing bubble

From Mises Wiki, the global repository of classical-liberal thought
Jump to: navigation, search

During and after the burst of the Dot-com bubble, numerous Austrian economists predicted the 2000s housing bubble that culminated in the Great Recession from 2008 onward.

Summary[edit]

In 2002, Robert Blumen summed up the effect of the activities of Fannie and Freddie on the housing market as shows the systemic risk and foresaw a coming bailout.[1] Sean Corrigan pointed to the blooming real estate business among all the bankruptcies, and noted that real estate bubbles tend to pop several years after stock market bubbles, and that mortgages may fare much worse compared to stocks... along with their owners.[2] Congressman Ron Paul criticized government involvement in housing, and said that like all artificially created bubbles, the boom in housing prices cannot last forever.[3]

In 2004, Mark Thornton wrote that higher interest rates (indicated by the Fed) "should trigger a reversal in the housing market and expose the fallacies of the new paradigm, including how the housing boom has helped cover up increases in price inflation. Unfortunately, this exposure will hurt homeowners and the larger problem could hit the American taxpayer, who could be forced to bailout the banks and government-sponsored mortgage guarantors who have encouraged irresponsible lending practices."[4] Later on, he spelled out the consequences for the construction industry, unemployment, foreclosures, bankruptcies, bailouts of banks and GSEs, and a long recession.[5]

Stefan Karlsson wrote that the next crisis will be more serious than the mild recession of 2001 one; as it is, in fact, that very same crisis, only postponed.[6]

In 2005, Doug French after observing the mania in Vegas, quipped "condos are the last segment of the housing market to catch fire in a boom and the first to crater in a bust.", and concluded that the bust must be close.[7] Gary North warned against the danger of ARMs (adjustable rate mortgages).[8]

Investor Peter Schiff acquired fame in a series of TV appearances (most in 2006 and 2007), where he opposed a multitude of financial experts and claimed that a bust was to come.[9] He was warning about the speculation, ARMs, houses that couldn't be sold, people walking away from them and coming bailouts for several years before in print.[10][11][12]

Predictions[edit]

Prediction shortlist:
Anderson, 2001, 2003, 2007; Armentano, 2004; Beale, 2009; Blumen, 2002, 2004, 2005; Corrigan, 2002; Crovelli, 2006; DeCoster, 2003; Duffy, 2005A, 2005B, 2005C, 2005D, 2006, 2007A, 2007B, 2007C, 2007D; Economics of contempt, 2008; Englund, 2004, 2005A, 2005B, 2005C, 2005D, 2006, 2007, 2008; French, 2005; Grant, 2001; Karlsson, 2004; MacKenzie, 2003; Mayer, 2003; Mueller, 2004; Murphy, 2007, 2008; North, 2002, 2005; Paul, 2000, 2002; Polleit, 2006; Ptak, 2003; Rockwell, 2002, 2008; Rogers, 2005; Schiff, Undated A, Undated B, Undated C, Undated D, 2003A, 2003B, 2003C, 2004A, 2004B, 2005A, 2005B, 2005C, 2005D, 2006A, 2006B, 2006C, 2007A, 2007B; Sennholz, 2002; Shostak, 2003, 2005; Thornton, 2004A, 2004B, 2005A, 2005B, 2005C, 2006, 2007A, 2007B, 2007C, 2007D; Trask, 2003; Wenzel, 2004; See also Woods (2009, p. 188 for further bibliography).


Anderson, William L. 2001. "The Party is Over," February 20

Anderson, William L. 2003. "Recovery or Boomlet?" July 07

Anderson, William L. 2007. "The Party is Over – Again," August 30

Armentano, Dominick. 2004. "Memo to Federal Reserve: Increase Interest Rates Now!"

Beale, Theodore. 2009. "The Return of the Great Depression"

Blumen, Robert. 2002. "Fannie Mae Distorts Markets." Mises Daily, June 17

Blumen, Robert. 2004. "All Real Estate, All the Time". March 8

Blumen, Robert. 2005. "Housing Bubble: Are We There Yet?" May 8

Colombo, Jesse. 2005. "Ten People Who Predicted The Financial Meltdown" (via Archive.org)

Corrigan, Sean. 2002. "The Trouble with Debt". July 01

Crovelli, Mark R. 2006. "Gold, Inflation, And... Austria?" May 31

De Coster, Karen. 2003. "The House that Greenspan Built: Irrationally Exuberant Wall Street Welfare Parasites and Their Fed-God." September 12

Duffy, Kevin. 2005A "The Super Bowl Indicator," February 5

Duffy, Kevin. 2005B. "Honey, I Shrunk the Net Worth," March 3

Duffy, Kevin. 2005C. "Alan, We Have a Problem," August 2

Duffy, Kevin. 2005D. "Panic Now and Beat the Rush," September 24

Duffy, Kevin. 2006. "Are Mortgage Borrowers Rational?" June 24

Duffy, Kevin. 2007A. "It’s a Mad, Mad, Mad, Mad World," May 22

Duffy, Kevin. 2007B. "For Whom Do the Bells Toll?" Barron’s, June 18

Duffy, Kevin. 2007C. "Financial Markets on Crack," August 22

Duffy, Kevin. 2007D. "Mr. Mozilo Goes to Washington," September 15

Economics of contempt. 2008. "The Unofficial List of Pundits/Experts Who Were Wrong on the Housing Bubble." July 16

Englund, Eric. 2004. "Monetizing Envy and America’s Housing Bubble". July 19

Englund, Eric. 2005A. "Houses Are Consumer Durables, Not Investments," June 8

Englund, Eric. 2005B. "Diminishing Property Rights Will Lead to a Higher Rate of Mortgage Defaults." June 28

Englund, Eric. 2005C. "When the Housing Bubble Bursts, Will President Bush Practice Mugabenomics?" July, 19

Englund, Eric. 2005D. "When Will America's Housing Bubble Burst?" November 4

Englund, Eric. 2006. "The Federal Reserve and Housing: A Cluster of Errors?" April 22

Englund, Eric. 2007. "From Prime to Subprime, America's Home-Mortgage Meltdown Has Just Begun." September 24

Englund, Eric. 2008. "Countrywide Financial Corporation and the Failure of Mortgage Socialism." January 28

French, Doug. 2005. "Condo-mania." July 11

Grant, James. 2001. "Sometimes the Economy Needs a Setback." New York Times. September 9

Karlsson, Stefan. 2004. "America's Unsustainable Boom." November 8

MacKenzie, D.W. 2003. "Doubts about Recovery" October 08

Mayer, Chris. 2003. "The Housing Bubble." The Free Market. Volume 23, Number 8 August

Mueller, Antony P. 2004. "Mr Bailout", September 30

Murphy, Robert P. 2007 "The Fed’s Role in the Housing Bubble." December 28

Murphy, Robert P. 2008. "Did the Fed, or Asian Saving, Cause the Housing Bubble?" November 19

North, Gary. 2002. "How the FED Inflated the Real Estate Bubble by Pushing Down Mortgage Rates: Report As of 2002," Reality Check, March 4

North, Gary. 2005. "Surreal Estate on the San Andreas Fault." November 25, 2005

Paul, Ron. 2000. "A Republic, If You Can Keep It" January 31

Paul, Ron, 2002. "Testimony to U.S. House of Representatives", July 16

Polleit, Thorsten. 2006. "Sowing the Seeds of the Next Crisis." April 25

Ptak, Justin. 2003. "Government Employees, Go Home!" November 12

Rockwell, Llewellyn H, Jr. 2002. "The Marvel That Is Capitalism" April 08

Rockwell, Llewellyn H, Jr. 2008. The Left, the Right, and the State. Auburn, AL: The Mises Institute, 2008

Rogers, Jim. 2005. "Interview with Jim Rogers on the housing bubble." April 22

Schiff, Peter. "Peter Schiff predictions" (video) Undated A.

Schiff, Peter. "Peter Schiff Was Right" (video). Undated B.

Schiff, Peter. "Peter Schiff was right 2006-2007 - CNBC edition" (video). Undated C.

Schiff, Peter. "Peter Schiff Was Right Again " (video). Undated D.

Schiff, Peter. 2003A. Commentary, March

Schiff, Peter. 2003B. Commentary, April

Schiff, Peter. 2003C. Commentary, June

Schiff, Peter. 2004A. Commentary, May

Schiff, Peter. 2004B. Commentary, June

Schiff, Peter. 2005A. Commentary, April

Schiff, Peter. 2005B. Commentary, July

Schiff, Peter. 2005C. Commentary, August

Schiff, Peter. 2005D. Commentary, October

Schiff, Peter. 2006A. Appearance on CNBC, January (video)

Schiff, Peter. 2006B. Speech to the Money Show Conference, February (video)

Schiff, Peter. 2006C. Speech to the Western Regional Mortgage Bankers Conference in Las Vegas November (video, transcript)

Schiff, Peter. 2007A. Crash Proof: How to Profit From the Coming Economic Collapse (1st edition) New York, N.Y.: Wiley, February 2007

Schiff, Peter. 2007B. Appearance on Fox News – January 12 (video)

Sennholz, Hans F. 2002. "The Fed is Culpable." November 11

Shostak, Frank. 2003. "Housing Bubble: Myth or Reality?" March 4

Shostak, Frank. 2005 "Is There a Glut of Saving?" August 4

Thornton, Mark. 2004A. "'Bull' Market?" February 9.

Thornton, Mark. 2004B. "Housing: too good to be true." June 4

Thornton, Mark. 2004C. "A Bull Market in Gold — Technically Speaking", March.

Thornton, Mark. 2005A. "Is the Housing Bubble Popping?" , August

Thornton, Mark. 2005B. "The Price of Gold: How High Can it Go?", August

Thornton, Mark. 2006. "The Economics of Housing Bubbles.", June

Thornton, Mark. 2007A. "We Told You So", March.

Thornton, Mark. 2007B. "Illegal Immigrants and the Housing Bubble", March.

Thornton, Mark. 2007C. "New Record Skyscraper (and depression?) in the making", August

Thornton, Mark. 2007D. "You Heard It Here First", August

Trask, H.A. Scott. 2003. "Reflation in American History." October 31

Wenzel, Robert. 2004. "Government Isn't God: FDIC Sticks Banks With Bad Loans and Sticks Borrowers With Subprime Junk."

Woods, Thomas E. Jr. 2009. Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. Washington D.C.: Regnery Publishing [13]

References[edit]

  1. Blumen, Robert. "Fannie Mae Distorts Markets", Mises Daily, June 17, 2002. Referenced 2011-01-10.
  2. Corrigan, Sean. "The Trouble with Debt", Mises Daily, July 01, 2002. Referenced 2011-01-10.
  3. Paul, Ron. "Testimony to U.S. House of Representatives", July 16, 2002. Referenced 2011-01-10.
  4. Thornton, Mark. "Housing: too good to be true." June 4, 2004. Referenced 2011-01-10.
  5. Thornton, Mark. "The Economics of Housing Bubbles", June 2006, p. 27, 29, 31. Referenced 2011-01-10.
  6. Karlsson, Stefan. "America's Unsustainable Boom", Mises Daily, November 8, 2004. Referenced 2011-01-10.
  7. French, Doug. "Condo-mania.", Mises Daily, July 11, 2005. Referenced 2011-01-10.
  8. North, Gary. "Surreal Estate on the San Andreas Fault.", November 25, 2005. Referenced 2011-01-10.
  9. Schiff, Peter. "Peter Schiff Was Right" (video). Referenced 2011-01-10.
  10. Schiff, Peter. "Fed official admits the emperor has no clothes!", Commentary, March 10, 2003. Referenced 2011-01-10.
  11. Schiff, Peter. "In Arm's Way: The Tender Trap of Adjustable Rate Mortgages.", Commentary, May 7, 2004. Referenced 2011-01-10.
  12. Schiff, Peter. "Housing Speculation is More Rampant Than You Think.", Commentary, July 5, 2005. Referenced 2011-01-10.
  13. Walter Block. Austrian Thymologists Who Predicted the Housing Bubble, LRC.com, December 22, 2010. Referenced 2011-11-29.

Personal tools

Namespaces

Variants

Actions

Navigation
Tools
Print/export