Failure of Doctrine: U.S. Housing Starts Tumble to Significant Modern Era Low

By: Kemp Moyer | Fri, Jan 23, 2009
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"All men profess honesty as long as they can. To believe all men honest would be folly. To believe none so is something worse." - John Quincy Adams

Coming out of the Tech/Internet/Telecom/Dotcom Mini-Bust of 2000-2002, Alan Greenspan engineered significantly below-market interest rates and George W. Bush and the DC yes-folks stormed the United States into two wars and unprecedented federal government deficit spending. These people, whether fool or fakes, essentially said "To hell with the future" in a Keynesian gambit, as they mortgaged everything to try to save their tenures from including economic restructuring under a much-needed correction.

Rather than having a prudent, sane, normal pull back in economic activity while malinvestments and bad debts were purged from the system, these characters instead went for broke to save their own reputations while providing a false sense of ego and power. Meanwhile they laid the groundwork for the most tremendous housing boom and BUST of American history.

Significant below market interest rates engineered by the Fed, as well as wayward agencies such as Fannie Mae and Freddie Mac and the hubristic conmen on Wall Street and within the banking establishment, allowed the U.S. housing boom to move to never-before-seen levels.

Now we are witnessing the outcome of such crass imprudence and outright fraudulent greed. For evidence, witness the below chart on U.S. housing starts:

First, notice that housing starts never adjusted during the previous mini-recession in 2001. Now, notice that housing starts rose to a monthly rate of 2.27 million in January 2006. Finally, notice that the unnatural boom has created the greatest bust in the post-WWII period. December new home starts came in at a scant 550,000. This is literally the lowest reading since the Federal Reserve has charted the data, dating back to 1959. The previous low for the data series was 651,000 in, get this, November 2008. Before that, the lowest reading was 767,000 in... October 2008.

Since January 1959, there have been 600 months through December of 2008. Over that time, monthly housing starts have only come in below one million 30 times, or 5.0% of the time. Furthermore, only 4 times have housing starts been under 800,000. This is 0.7% of the months on record. These months were January of 1991 at 798,000 and then October, November, and December of 2008. This is some stunningly clear data about where the residential construction market currently stands.

To put it bluntly, the so-called "leaders" of our system historically failed. At this time, it is important to take the steps necessary to prepare yourself and your loved ones for more challenging broad material economic conditions. Additionally, it is important to note that the same establishment approach (led by the Federal Reserve System and deficit Keynesian fiscal policy) has utterly failed and has proven in practice what other theorists (such as Ludwig von Mises) soundly proved in theory many years ago.

With a new president in power, it is important that we not only look forward, but, more importantly, review the past so as to learn from the mistakes we made in order to avoid those as we head into a more responsible and sane future.

(Note: data is sourced from St. Louis Fed)



Kemp Moyer

Author: Kemp Moyer

Kemp Moyer,

Kemp Moyer is the Editor-in-Chief and publisher of the online economic and social commentary website, Ponder This... ( Kemp works as a private business valuation professional in the San Francisco Bay Area, and has a background in mortgage backed security brokerage and asset and independent wealth management. Kemp can be reached at

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