I think the Fed has several objectives:
1. Maintain a sneaky stable USD and thus the cheapest possible capital flows. By that I mean a slow shaving of the Roman coins, no big pieces, so that when the Old Maid Card holders look at it, it's barely noticeable, that means no sudden swoons.
2. They intend to blow a hole in MEW (house as as ATM).
idorfman.com
How much I'm not sure, but at least half, which would relieve rates pressure right there, and get capital reallocated more properly. MEW is crowding out the more scarce foreign capital flows, and wars and government has priority over Joe Soccer Mom's $3 Asian pears from WFMI. A chunk of Ponzi finance has to go. Hyper-elevated housing prices are an inflationary cancer, allowing excessive borrowing and spending price pressure. So the goal is to knock them down 5-10% in a soft landing manner, and stop borrow, borrow, borrow, buy, buy, buy. It's also time to deal with this through tougher regs on the mortgage industry and curtail the toxic loans, as opposed to just using higher taes. The purchase index needs to get below 350 and stay there. A little deflation is what the US economy really needs right now, although the Fed will call it "price stability".
3. Hurt the Riskloves. Risklove activity and behavior is a causa promixa (most think causa remota, but not me) of much of the inflationary boom activity. They need to be bloodied, and judging from their continued behavior after being taken to the woodshed last month, blooded hard, so they can't really come back. |
