The Fed Successfully Destroyed The U.S. Housing Market
BY DAVE KRANZLER
AaronLayman.com
MAY 2, 2018
A few days ago a friend of mine sent me a link to some “insight” on the coming economic developments that we should be preparing for in terms of debts and deficits. The company providing this research piece has over a $trillion in assets under management. Since I have a healthy skepticism of anything the financial “services” industry is selling I decided to give it a read. It was very informative, partly due to a complete fundamental ignorance of basic economics, but also because of an obvious contradiction with the author’s stated assumptions.
As I mentioned to my friend in a private message, I see the same fallacious arguments repeatedly within the housing industry. America is great, deficits and debt don’t matter. Rah, Rah, Rah! I get it. It’s a sales oriented business. What concerns me is when people put their hard-earned money into housing or any other supposed store of value thinking that the sky is the limit. We are living in an age of epic distortions, misinformation and outright fraud. Apparently we learned absolutely nothing from the Great Recession, save for the government and Federal Reserve’s determination/ability to cover it up and pretend like nothing ever happened.
As I was writing about the shortage of affordable new homes this morning, I couldn’t help but think about how we arrived here and how the transgressions leading to the last housing crash have been completely swept under the rug. This is not to say that the responses after the housing crash have been any better. We are now surrounded by banks which are larger than ever even as they continue to break the law racking up huge fines that amount to nothing but a slap on the wrist while the CEO reaps a huge payday. Criminality within the U.S. banking system is now a feature, not a bug. This should not be surprising considering the events of the last decade.
Getting back to the issue of affordable homes, one of the long cons on the American public continues to be the epic policy failures of the Federal Reserve that facilitated the destruction of the U.S. housing market as they buried the idea of “affordable” homes for the sake of their Wall Street roots. When a smallish, aging 3-bedroom, 2-bath detached home in need of repairs becomes a bidding war for the next young couple who just wants a decent roof over their head, that’s not exactly a healthy housing market or a healthy economy. It’s a sign that something is seriously out of whack with our priorities.
Back in January money manager James Stack was making a prescient warning about an overheated housing market, pointing out the excesses and irrational exuberance that were driving home prices and valuations of many builder stocks to extremes. He also keyed in on one of the most critical factors igniting the last housing downturn…The Fed.
“The last downturn came about when economic growth slowed after a series of rate increases, exposing the “rot in the woodwork” and prompting loan defaults.”·
While the Federal Reserve continues to claim the U.S. economy is at or near “full employment”, many Americans know different. They know a con when they see one.
“Based on their analysis of the labor market, our economists continue to believe that, while improvements can be made in increasing employment, we are likely at or already past “full employment” in the U.S.” Robert Kaplan
The Rest…HERE
