As reported this afternoon, Fed’s Olson says no U.S. housing price ‘bubble’. Perhaps Olsen has been talking with (or even conspiring with?) the IMF, who have recently come out with a statement that there is no housing bubble and a short while before that no chance of a financial crisis. Or perhaps he hasn’t been watching TV, where flipping property has its own reality show.“’’In order for there to be a true bubble, there has to be a single market,’ Olson said.”.
I’m not quite sure about that. Surely people move from one region to another that has cheaper housing? More to the point, however, is that the credit expansion that has fueled the housing bubble is nationwide, and increasingly worldwide as the US exports its inflation to other countries who buy dollars. The housing GSEs - Fannie and Freddie - are keys to funelling of credit expansion into housing and recycling of dollar debt overseas. The ablity to continually expand their balance sheet may be threatened as they are now starting as their finances come under more scrutiny. See Peter Eavis explains Fannie’s hedging.
