Here is a thought about the FED

Discussion in 'Economics' started by jjf, Sep 24, 2007.

  1. jjf


    What if the FED continues to expand money supply, but the banks raise the mortgage criteria in order to divert the money elsewhere.

    Would incomes rise enabling existing mortgages to be met.

    Would the bubble be passed elsewhere.

    It is a little like squeezing the toothpaste tube in the center. You are never quite certain where the next pressure buildup will occur.
  2. jjf


    No response and here I am thinking that ET's have an educated opinion on everything.

    If the Fed could inflate money supply
    without inflating asset values, then surely it would be the new new thing.

    I know that you will say they would be promoting stagflation, but I say what the hell, who cares.
    Carelessness has never bothered the Fed in the past so why bother now.
  3. cant see money supply inflation WITHOUT asset value inflation.....the two share a lung

    Greenspan's 1% FF bubbled housing and now there's a bust-panic-bailout
  4. S2007S


    There will be another bubble in other asset classes, its not healthy and will lead to economic consequences down the road.
  5. jjf


    excellent point.

    but what if the banks raise the lending criteria as the fed expands supply.

    I know, I know you will say that cash is king and the rich will get richer

    but is'nt that the way things are geared to move
  6. It's the poor ones who can't qualify that need the credit, the ones that qualify can usually pay cash anyway and are not a part of the problem we are in now. So unless you give cheap money to poor people, cheap $$ isn't going to really fix the problem, (problem being that eveyone has changed their last name to Jones)
  7. jjf


    Now you are entering into the spirit of things.

    The trick is to place money in the pockets of the poor and yet restrict their access to RE by way of let us say, 20% deposit and repayments no greater than 35% of proven income.

    This way you will get stagflation.
  8. easy credit means cheap money moves offshore rather than invest it a busted currency like the dollar...

    eventually, offshore cash will return to purchase assets at rock bottom values.....
  9. jjf


    now we are on a roll.

    you were'nt living in japan for the last 15 years by any chance.
  10. easy money means a 20's style boom and then the movie ends badly........
    #10     Sep 24, 2007