Two bubbles and two central banks: What now?

Event Summary

Six years after the U.S. housing bubble started to pop, both the United States and Europe are plagued by tepid growth and falling asset prices and Europe is embroiled in endless financial troubles. Are we living in a post-bubble world yet?

Thursday, a distinguished panel at AEI looked at the emerging issues surrounding the bubble. Thomas Zimmerman of UBS examined the housing market to demonstrate that, while the market is moving the right way, it is still much worse than it looks. AEI's Mark Perry followed up by pointing out that more people are currently buying more houses more frequently and at higher prices than they have in years.

The panel then shifted from the housing bubble to Europe banking bubble, as Desmond Lachman showed how the European Union's pro-cyclical policies will make the troubles in Europe worse in the coming months. Christopher Whalen then argued that fears of bad financial policy and of fraud have scared an investment recovery out of existence, and John Makin closed by explaining how central bank policy has compounded recent bubble problems by driving investors out of the market.

The event ended with a transition from bubbles to bubbly as an audience member received a surprise marriage proposal.

--Daniel Hanson

Event Description

It has been six dreary years since the U.S. housing bubble peaked, and there are finally suggestions that the housing market has at long last bottomed out. But has it? If so, what are the financial and public policy implications? And Europe’s bubble: how much longer will its sovereign debt and banking crisis drag on, and how much worse will it get? 

Saddled with the rubble of a burst bubble, central banks are tasked with picking up the pieces. How might we assess the past actions of the Fed and the European Central Bank as “investors of last resort,” and how can we evaluate their challenges going forward?  These and other relevant questions will be addressed by an expert panel at this AEI event.

If you cannot attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

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About the Author

 

John H.
Makin

 

Desmond
Lachman

 

Alex J.
Pollock

 

Mark J.
Perry

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