An Exercise in Vagueness

Let's just assume for the sake of argument that there's merit in today's comments by Ben Bernanke, as reported by Associated Press Economics Writer Jeannine Aversa. Maybe he's being frank when he says the housing market is set to cool moderately next year. But, what the hell does that mean? I understand what he means when he says prices are unlikely to continue rising. Ok. Simple enough. But what's "a moderate cooling?" Does that mean prices will continue to rise, but just not as quickly? Does it mean prices will remain flat? Does it mean values will fall, but only a little? It's these intentionally vague comments that frustrate the life out of people who are worried that they're going to be crushed by their interest-only loan product when the equity they'd planned on achieving doesn't materialize. The AP writer did her job by putting in the explanation that many private analysts think that the overall economy will grow by something like 3.25 percent, but the overall economy could do that at the same time the housing market tanks. But, then, what do you expect? The president's top economist isn't going to come out and say "housing prices are going to tank." If he did that he could kiss goodbye any chance of becoming the next Alan Greenspan. And, well, can we really trust anything they say anyway?

The rapid rise in house prices -- which has made Americans feel wealthy and inclined to spend over the last several years -- won't continue indefinitely, the president's top economist said Thursday.

Still, a mild slowing in the buoyant housing market shouldn't pose a danger to the country's overall economic health, Ben Bernanke, chairman of the Council of Economic Advisers, told Congress' Joint Economic Committee.

"House prices are unlikely to continue rising at their current rates," he said. "However, as reflected in many private-sector forecasts ... a moderate cooling in the housing market, should one occur, would not be inconsistent with the economy continuing to grow at or near its potential next year."

Many private analysts would consider such growth to be around 3.25 percent.

Bernanke's comments were part of wide-ranging testimony on the economy's outlook. Bernanke repeated the Bush administration's belief that the double blows of hurricanes Katrina and Rita will reduce economic growth in the short term, but the economy's longer-term growth path remains solid. That's consistent with the assessment made by Federal Reserve Chairman Alan Greenspan and his colleagues.

Bernanke, a former Fed member, is mentioned frequently as a possible successor to Greenspan, whose 18-year run at the central bank is expected to end early next year.

Art is by Max Schindler

— The Boy in the Big Housing Bubble