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Stanley Fischer Doesn’t Have a Magic Needle for Deflating Housing Bubbles

Federal Reserve Vice Chairman Stanley Fischer
Federal Reserve Vice Chairman Stanley FischerPhotograph by Andrew Harrer/Bloomberg

Israel dodged the recession that hit most of the world last decade, partly because it never had an extreme housing boom and bust. Much of the credit for that stability went to Stanley Fischer, the Zambian-born economist who headed Israel’s central bank from 2005 through 2013 and is now No. 2 at the Federal Reserve in the U.S.

But Fischer made clear today in a speech in Stockholm that he doesn’t have a magic needle for deflating housing bubbles. Israel’s jump in housing prices wasn’t so much prevented as postponed a few years. Robert Shiller, the Nobel prize-winning Yale University economist, said in January that Israel’s housing market “sounds like a bubble,” noting that Fischer “tried to restrain it but failed.” Home prices are up more than 80 percent since 2007 and rose 8.8 percent in the 12 months ended in May.