Chart: Frequency of Alan Greenspan's Laughter Predicted the Housing Bubble

In the infamous transcript of the Federal Reserve's first meeting in 2006, the word "[Laughter]" appeared at least 45 times. In one case, Fed Chair Alan Greenspan mocked his fellow economists' ability to predict the future, and the board laughed. Two years later, the global economy fell apart due to a housing meltdown that many Fed economists noted, but discounted. I counted the top ten most ironic laugh lines of the meeting here.

The Daily Stag Hunt did one better: It counted the word "[Laughter]" in every Federal Open Market Committee (FOMC) transcript between 2001 and 2006 -- the bubble years for the housing market. Then they graphed the results.

http://www.washingtonpost.com/rf/image_606w/WashingtonPost/Content/Blogs/ezra-klein/StandingArt/FOMC%20Funnies%20v2.0.jpg?uuid=Rl7D6EN-EeGuleP9QvU3_w

Does that picture remind you of something? Here's a look at home prices between 2001 and 2006:

case shiller 1.png
Pull back the lens, and here's what happened to home prices when the laughter stopped:

case shiller 2.png

FOMC laughter: Totally random incidence of economic giggling, or the very best coincident indicator we have? You be the judge.



Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

The Horrors of Rat Hole Mining

"The river was our source of water. Now, the people won't touch it. They are repulsed by it."

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Video

The Horrors of Rat Hole Mining

"The river was our source of water. Now, the people won't touch it."

Video

What's Your Favorite Slang Word?

From "swag" to "on fleek," tweens choose.

Video

Cryotherapy's Dubious Appeal

James Hamblin tries a questionable medical treatment.

Video

Confessions of Moms Around the World

In Europe, mothers get maternity leave, discounted daycare, and flexible working hours.

Video

How Do Trees Know When It's Spring?

The science behind beautiful seasonal blooming

More in Business

Just In