Today's Wall Street Journal has a preview of the new book by Alan Greenspan, entitled "The Age of Turbulence: Adventures in a New World".
In the book he speaks of several things including criticizing the current administration on its economic policy. Forget that, what I found interesting was his analysis of what has fueled the housing market over the last several years. I thought it was low interest rates, greedy lenders, unqualified borrowers, easy money and a mentality that the market would continue to increase. Turns out, according to Mr. Greenspan, it was the end of communism. The end of communism "unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices and thus on long term interest rates".
According to Jim Cramer this is the guy who espoused the benefits of adjustable rate mortgages and then hiked interest rates 17 times in a row. But it was the end of communism that fueled the greatest bull market for housing we are likely to see in our lifetime. Wow, I had no idea.
To this, we owe a tremendous debt of gratitude to Ronald Reagan. Many people associate the end of communism with the way in which he negotiated with the Soviet Union, and it was never more evident than in the speech he gave in Berlin, in which he took Mr. Gorbachev to task. Little did we know then, that speech would ignite prosperity in the housing market and overall economy to the likes of which we may never see again.
I miss Ronald Reagan.
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