In Which I Count Things...

I am in the Wall Street Journal:

Economists’ Views on Interest Rates, Housing Bubble: Economists’ Views on Interest Rates, Housing Bubble - Real Time Economics - WSJ: The Wall Street Journal surveyed economists who are part of the National Bureau of Economic Research’s Monetary Policy Program and asked them whether low interest rates caused the housing bubble. Here is a sampling of their responses, which represents their views and not the NBER....

BRAD DELONG, BERKELEY PROFESSOR: If you believe that the Fed kept the fed funds rate 2% below its proper Taylor-rule value for 3 years, that has a 6% impact on the price of a long-duration asset like housing. Even with a lot of positive-feedback trading built in, that’s not enough to create a big bubble. And it wasn’t the bubble’s collapse that caused the current depression--2000-2001 saw a bigger bubble collapse, and no depression.

This is another one of those in which I have to conclude that either I am deranged, or other economics professors like Bordo and Goodfriend are. I believe that prices overreact--that a fall in interest rates that ought to generate a 1% appreciation might generate a 3% one. But even so excessively-relaxed monetary policy relative to any Taylor rule standard looks much too small to generate the housing bubble.

At least Steinsson, Richardson, Kuttner, and House are deranged along with me. That's good company...