From Paul Krugman’s Op-ed piece Bursting Bubble Blues [NYT subsc]:

* (1) Housing bubble? What housing bubble? “A national severe price distortion [in housing] seems most unlikely in the United States.” (Alan Greenspan, October 2004)

  • (2) “There’s a little froth in this market,” but “we don’t perceive that there is a national bubble.” (Alan Greenspan, May 2005)

  • (3) Housing is slumping, but “despite what you hear from some of the Eeyores in the analytical community, a recession is not visible on the horizon.” (Richard Fisher, president of the Federal Reserve Bank of Dallas, August 2006)

  • (4) Well, that was a lousy quarter, but “I feel good about the U.S. economy, I really do.” (Henry Paulson, the Treasury secretary, last Friday)

  • (5) Insert expletive here.

Krugman makes the argument that the drop in GDP and construction spending as well as the rise in foreclosure rates foretell a long decline in housing (I seem to recall a recurring pessimistic theme in his past columns on housing). From a political perspective, the Bush administration has tried to turn coverage from the Iraq War to the economy but that doesn’t appear to be a wise strategy.

In case you’re wondering, I don’t blame the Bush administration for the latest bad economic numbers. If anyone is to blame for the current situation, it’s Mr. Greenspan, who pooh-poohed warnings about an emerging bubble and did nothing to crack down on irresponsible lending.

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4 Responses to “Good Grief: 5 Stages of Housing Grief”

  1. When M/M Average American Homebuyer can’t pay their mortgage they face foreclosure. Finish the following sentence: When the US Goverment can’t pay their bills ____________. Since most of this money which is called ‘the deficit’ or ‘the national debt’ etc. has been used to buy war machines to pursue oil rights what is there to foreclose upon? What is the collateral?

    Maybe Pres Bush was born too early in the 20th century, he didn’t get a chance to get all his war games fantasies played out until he became president because the video game industry didn’t yet exist when he was an adolescent (chronologically anyway).

  2. skep-tic says:

    “Since most of this money which is called ‘the deficit’ or ‘the national debt’ etc. has been used to buy war machines”

    National Defense spending is currently less than 4% of GDP, or less than half of what it was in relative terms during the Cold War.

    Social Security, Medicare, and Medicaid spending are more than double our Defense budget.

  3. John Philip Mason says:

    Hey All:

    Personally, I don’t think comparing federal spending to the GDP offers much clarity. If I remember correctly, I think consumer spending alone makes up two-thirds of the GDP. I prefer to compare:

    1) government spending to itself (i.e. military vs. debt vs. health care, etc.) 2) current spending trends to past trends and 3) compare one country to another.

    A very brief and well balanced overview (in my opinion) is available at

    FYI – There are numerous websites that offer the other end of the spectrum (from using the GDP) and these include adding defense spending of all programs, plus military personnel benefits, plus the pro-rata share of the federal deficit obligations/payments as a result of all these items.

    Peace – John

  4. John Philip Mason says:

    Some how the link got broken. Some right winged conspiracy 😉