Laughing All The Way To The Central Bank
February 1, 2012 by Bob Livingston
As the housing bubble expanded in the run-up to its inevitable crash, the Federal Reserveâ€™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: â€śOkay. Mr. Chairman, it is a great delight to see a 200 percent increase in the number of beards around this table.[Laughter]â€ś)
- Innuendos: (Chairman Bernanke: â€śStill pretty large.[Laughter]â€ś)
- Nerd humor: (â€śAgain, within the normal errors of Okunâ€™s lawâ€”despite its name â€ślaw,â€ť itâ€™s a pretty loose empirical relationship[Laughter]â€ś)
Then there are these, which demonstrate the joke was really on us:
- From the meeting of Jan. 31, 2006: â€śNeedless to say, itâ€™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 youâ€™re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot.[Laughter]â€ť
- And, from Vice Chairman Timothy Geithner in the same meeting: â€śIâ€™d like the record to show that I think youâ€™re [Greenspan] prettyÂ terrific, too.[Laughter] Â And thinking in terms of probabilities, I think the risk that we decide in theÂ future that youâ€™re even better than we think is higher than the alternative.[Laughter]Â With that, the economy looks pretty good to us, perhaps a bit better than it did at the lastÂ meeting. Â With the near-term monetary policy path thatâ€™s now priced into the markets, we think theÂ economy is likely to grow slightly above trend in â€™06 and close to trend in â€™07…â€ť
Itâ€™s easy to think of these guys as just evil, which they are. But doesnâ€™t this exchange between Ben Bernanke and Greenspan in May 2004 prove theyâ€™re also incompetent? â€śHey, Boss, thereâ€™s this 2,600sf house downtown selling for $839k. Sweet deal, but itâ€™s a bit of a stretch, you think I should hold off?â€ť 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 heâ€™s stuck with a house thatâ€™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 didnâ€™t know because heâ€™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 werenâ€™t so sad — especially considering that Bernanke is doing it to us again by keeping interest rates at near zero for the foreseeable future.