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Did Janet Yellen Really Warn Us about the Housing Bubble?

The media recently has lauded Janet Yellen, Obama??s choice to become the next Fed chairman, for her prescient warnings in the mid-2000s that the housing bubble could cause a financial crisis. For example, Alan Blinder wrote in the Wall Street Journal, Janet Yellen ??warned, as early as 2005, that the titanic real-estate market was heading for an iceberg.?

Really? In a speech in October, 2005, at the Haas School of Business in San Francisco, Yellen sought to answer three basic questions about the real-estate bubble: ??First, if the bubble were to deflate on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble? My answers to these questions, in the shortest possible form, are ??no,?? ??no,?? and ??no.???

She finally concluded that the housing bubble ??could be large enough to feel like a good-sized bump in the road, but the economy would likely to be able to absorb the shock.?

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Written By

Mark Skousen is a college professor, prolific author and world-renowned speaker. He??s made his unique sense of market and investment trends known and respected in the financial world. With a Ph.D. in economics and a focus on the principles of free-market capitalism and ??Austrian? economics, Mark Skousen has often gone contrary to the crowd in his investment choices and economic predictions ?? and has often been proved right.

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archive

Did Janet Yellen Really Warn Us about the Housing Bubble?

The media recently has lauded Janet Yellen, Obama’s choice to become the next Fed chairman, for her prescient warnings in the mid-2000s that the housing bubble could cause a financial crisis. For example, Alan Blinder wrote in the Wall Street Journal, Janet Yellen “warned, as early as 2005, that the titanic real-estate market was heading for an iceberg.”

Really? In a speech in October, 2005, at the Haas School of Business in San Francisco, Yellen sought to answer three basic questions about the real-estate bubble: “First, if the bubble were to deflate on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble? My answers to these questions, in the shortest possible form, are ‘no,’ ‘no,’ and ‘no.’”

She finally concluded that the housing bubble “could be large enough to feel like a good-sized bump in the road, but the economy would likely to be able to absorb the shock.”

To read the rest of this article, click here now.

Newsletter Signup.

Sign up to the Human Events newsletter

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