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Does the Fed use selective language to disguise an inflationary crisis?

*Financial Times, by Krishna Guha , September 16, 2007

“Mr Greenspan said he would expect ‘as a minimum, large single-digit’ percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was ‘in double digits.’

Mr Greenspan said house prices were probably already down about 2-3 per cent from their peak on a national level.

However, he cautioned that it was very difficult to predict how large the ultimate decline would be.

As Fed chairman, Mr Greenspan had talked about ‘froth’ in the housing sector, but never said there was a bubble in the market as a whole. His successor Ben Bernanke has also avoided the word ‘bubble.’

But Mr Greenspan told the FT that froth ‘was a euphemism for a bubble.’

He said he still thought froth – a collection of bubbles – was a better description, because of the variation in house price appreciation in different local housing markets. But he said ‘all the froth bubbles add up to an aggregate bubble.’

The former Fed chairman said the current turmoil in financial markets was ‘an accident waiting to happen.'”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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