The American economy is suffering from excessive debt and the Fed is trying to solve the problem by creating massive amounts of new debt to maintain spending. Real estate equity extraction is one primary expression of this. home.pacbell.net
> When expressed this simply, even a small child quickly understands why this will fail in the long run.
You wrote, I did not say I thought RE loans have less risk, I wrote, "while at the same time others have decided that RE lending has less inherent risk".
. . . If this is what you meant, then yes you're correct, the "Home Equity Extraction" chart merely documents a Monetarist hallucination made real.
As Harvard economist Joseph Schumpeter said,
"policy does not allow a choice between depression and no depression, but between depression now and a worse depression later."
"Moneatry inflation pushed far enough would undoubtedly turn depression into the sham prosperity so familiar from European postwar (WW-I) experience, and would, in the end, lead to a collapse worse than the one it was called in to remedy."
For "recovery is sound only if it does come of itself. For any revival which is merely due to artificial stimulus leaves part of the work of depressions undone and adds, to an undigested remnant of maladjustment, new maladjustment of its own which has to be liquidated in turn, thus threatening business with another [worse] crisis ahead"
Or as my Grandfather's cousin Charles Rist Governor of the Bank of France in the 1930s said,
"A policy aimed at monetary stability will secure a relative stability of prices, but the economic history of the 1920's teaches us that a policy whose goal is stabilization of prices may result in inflation of money and credit, and very unsound speculation."
The Fed has a Bull by the tail -- and as Mark Twain said, "Anyone who has had a bull by the tail knows five or six more things than someone who hasn't." |
