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fkusumot said: There's an artificial demand for jobs and home ownership? Regardless, the housing bubble is not the reason for the crisis. When the dot.com bubble burst far more money was lost than has been lost so far. The problem is the B-Paper mortgage's were rolled into CDO's, the CDO's were given ridiculous bond ratings, investment banks were allowed to keep the CDO's off their books using SPV's, the bond insurer's were undercollateralized and the S.E.C. failed at creating even the semblance of some oversight or guidellines for GAAP that were connected to reality. The Fed is primarily interested in keeping the business cycle in check. That's why it was created. We want low inflation and low unemployment. And what is your definition of artificial? Do you mean that there should be no government regulation in markets at all because that would be "artificial"? |
What I mean by artificial is that the demand would not exist under normal circumstances. How can you not blame the housing bubble on the financial crisis? If people did not default on their loans, none of this would be a problem. You may mention CDOs and bad practices by the rating agencies, but they were all the result of the Fed's mismanagement of the money supply. In 2004 the fed funds rate was still at a shockingly low one percent- a level that had not been seen in over forty-five years. The real fed funds rate was actually negative for almost three years. That was not seen since the mid-70s, and we all know what happened after that debacle.
I am glad the Federal Reserve is here to fight inflation. I suppose by all measures they are succeeding.
http://www.economics-charts.com/cpi/cpi-1800-2005.html
