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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (34625)	6/29/2005 12:23:35 PM
From: bluepearl	Read Replies (1) \| Respond to of 306849

In the late 90's Greenspan had a term for this with regard to the stock market. I believe he called it the "Wealth Effect". This quote from 2001 shows Greenspan's view: ************************* NAR shared its findings with the Federal Reserve Board in mid-October, in response to a meeting between the association’s leadership and Chairman Greenspan earlier this year. “At the time, Mr. Greenspan theorized that the wealth effect of homeownership was offsetting some of the losses on Wall Street in the overall economy – this survey shows Mr. Greenspan is right,” Lereah said. ************************** Funny that in the late 90's Greenspan pitched the wealth effect begin generated by the stock market as a negative that encouraged him to hike rates. Yes, perhaps the wealth effect smoothed over the stock bubble but when and how do you pull the plug on this monster.

To: Wyätt Gwyön who wrote (34625)	6/29/2005 6:14:08 PM
From: mishedlo	Respond to of 306849

what you ignore is the housing bubble is the new "wage growth". in fact, housing "wealth" extraction more than makes up for the real wage growth of past decades. because you think housing inflation only affects new buyers, you ignore all the current owners who use the bubble to prop up their earned income. the effective "bubble income" is growing much faster than wage growth of the 70s. the housing bubble is helicopter money, the most blatant kind of inflation there is. On the contrary I do not ignore it al all. It is indeed the busting of that bubble that will bring upon the deflation that I am calling for. Notice I said "calling for" as opposed to what we are in right now which I guess the best word would be stagflation. To believe in sustainable inflation you have to believe the housing bubble can go on forever. I say it cant and it wont and the end is at hand. When it pops we will have deflation, regardless of what the FED does to fight it. Mish