The more the dollar crashes in value the less house prices will fall in terms of dollars. The less the numbers fall the less losses for the banks, again in terms of dollars. The less the banks lose the less the fed has to bail them out directly.
So it looks like to me they are doing it on purpose.
The fed is spreading the losses to everyone who holds dollars (or assets that are in dollars) and away from the banks by devaluing the dollar. Everyone’s savings are devalued. The federal governments debt is now less even though the numbers are huge, each dollar owed is worth substantially less so it take less actual wealth to pay it back.
We as a nation have become poorer. But that’s what happens when you borrow more than you can pay back...
Just my 2 cents...
“The more the dollar crashes in value the less house prices will fall in terms of dollars. The less the numbers fall the less losses for the banks, again in terms of dollars. The less the banks lose the less the fed has to bail them out directly.”
Disclaimer:I’m not an economist but I play one on my pc.
I agree with your comment above 100%. Bernanke is picking the lesser of two evils. He’s picking inflation in an attempt to prop up housing values and avoid a financial meltdown at the expense of consumers at the gas pump and grocery store. He appears to be in an unenviable position.
agreed
Such is the nature of “fiat money”....throughout history ...fiat money always goes to -0-...NO EXCEPTIONS..
Greenspan understood it way back in ‘66 http://www.321gold.com/fed/greenspan/1966.html before he got political and Keynesian religion
The more the dollar crashes in value the less house prices will fall in terms of dollars.
Could you expand on that correlation, because for the life of me, I can’t see it. If today’s dollar was worth a penny tomorrow, how would that affect the cost or benefit of any assets within the USA? Imports would cost 100 times more, but your income and outflow would all be relatively the same. A $100,000 income would have $1,000 value but your $500,000 mortgage would have a value of $5,000. No difference. You’ve totally lost me...
I can see how a crashing dollar and high inflation shrinks the national debt over time. But how does that stop the fall in house prices in time to end this liquidity crisis?