In 1999, the stock market was experiencing a bubble, which as most people know, popped, and caused many stock market speculators to lose money. During the time leading up to the crash, the Fed chairman did not publicly acknowledge the bubble. However, according to an article in today’s Wall Street Journal, the Fed was aware of the bubble in 1999.
Federal Reserve meeting minutes are released to the public after a five-year lag, so minutes from a December 1999 meeting have recently become available. The documents show that there were individuals at the Federal Reserve well aware of the existence of the stock market bubble. They chose not to make any formal announcement.
An article by Bill Fleckenstein on MSN Money brought this to my attention. If we can’t trust the Fed to admit there was a stock market bubble, why would we trust them to acknowledge a real estate bubble? The MSN article goes into further detail.
Most people probably don’t need the Federal Reserve to tell them when there is a bubble and when there is not, but the issue is that what is said in private doesn’t match what is said in public.
Subscribe
12:42 pm (reply)
This was an eye opener, thanks for the heads up
11:52 am (reply)
I’m willing to try to believe that we’re in the midst of a real estate bubble since housing prices are so high, but sort of a massive plague hitting the states and drastically reducing our population, it seems to me that prices may go down a few percent, but that’d be the extent of it. We’re growing too fast as a country, especially in metropolitan areas, for me to believe that housing could possibly become less desirable for individuals. Maybe there’s some information I don’t have here, but overall it seems if you have a few years’ leeway for selling a property, you’ll do just fine. Can you give me any basis for being worried about the “bubble”? I know everyone talks about what happened in the Eighties, but even so it seems that within ten years home prices were higher than ever.
I’ve been thinking about this quite a lot since my guy and I are real estate investors, and even if fuel prices go sky-high, it seems that demand will just increase for smaller, non-McMansion homes, just like hybrid sales rose and SUV sales declined when gas prices hiked.
Please, let me know what I’m not considering here—I want to make sure we’re considering everything as we look at purchasing yet another property….
11:53 am (reply)
I meant “short of”. Pardon my typos.
10:12 pm (reply)
You can’t forget the famous quip ‘irrational exuberance’...in 1996.
Maybe the Fed was way ahead of the curve?
In all seriousness, the Fed governors is just as politically astute as the best politician. Why kill the golden goose (stock market appreciation, cap gain taxes, and increasing income taxes) with acknowledging inflation?
/cynicism