As the housing bubble expanded in the run-up to its inevitable crash, the Federal Reserve’s Federal Open Market Committee meetings became a veritable laugh fest.
Scribes have been perusing transcripts from FOMC meetings up to 2006 that the Fed released in January. They have found that, as the bubble expanded, the giddiness in the meetings likewise increased.
According to a blog called The Daily Stag, stenographers recorded an average of 16.5 guffaws per meeting in 2000. But by 2006, the knee-slappers had increased to 43.875 per meeting.
Some of the loudest howls:
- Beard jokes: (Mr. Poole: “Okay. Mr. Chairman, it is a great delight to see a 200 percent increase in the number of beards around this table.[Laughter]“)
- Innuendos: (Chairman Bernanke: “Still pretty large.[Laughter]“)
- Nerd humor: (“Again, within the normal errors of Okun’s law—despite its name “law,” it’s a pretty loose empirical relationship[Laughter]“)
Then there are these, which demonstrate the joke was really on us:
- From the meeting of Jan. 31, 2006: “Needless to say, it’s fitting for Chairman Greenspan to leave office with the economy in such solid shape. And if I might torture a simile, I would say, Mr. Chairman, that the situation you’re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot.[Laughter]”
- And, from Vice Chairman Timothy Geithner in the same meeting: “I’d like the record to show that I think you’re [Greenspan] pretty terrific, too.[Laughter] And thinking in terms of probabilities, I think the risk that we decide in the future that you’re even better than we think is higher than the alternative.[Laughter] With that, the economy looks pretty good to us, perhaps a bit better than it did at the last meeting. With the near-term monetary policy path that’s now priced into the markets, we think the economy is likely to grow slightly above trend in ’06 and close to trend in ’07…”
It’s easy to think of these guys as just evil, which they are. But doesn’t this exchange between Ben Bernanke and Greenspan in May 2004 prove they’re also incompetent? “Hey, Boss, there’s this 2,600sf house downtown selling for $839k. Sweet deal, but it’s a bit of a stretch, you think I should hold off?” Greenspan told him to go for it, and be sure to get an adjustable rate mortgage that resets after three years.
He did, and now he’s stuck with a house that’s worth no more than it was then, just like the rest of us.
These jokesters know nothing more than how to create bubbles that eventually burst. But Ron Paul warned them all for years that what they were doing was going to lead to a crash. He didn’t know because he’s prescient. He knew because he understands Austrian economic theory.
It was the Keynesians who were caught with their pants down. It would make for a good joke if weren’t so sad — especially considering that Bernanke is doing it to us again by keeping interest rates at near zero for the foreseeable future.