4 ms·
Fed policy inflates asset prices, those assets are owned in large part by wealthy people. Let's say you bought a house ten years ago and the price has quadrupl
by gridlockd 6y ago
Fed policy inflates asset prices, those assets are owned in large part by wealthy people.
Let's say you bought a house ten years ago and the price has quadrupled. If you sold now, you could buy the same kind of house. No win, no loss.
However, if you took the money to (for example) hire people whose wages have merely doubled, you can now hire twice as many workers.
This is practically free money. Of course there's some speculative risk involved (the Powell Put) but it's modest.
Meanwhile, average consumers have to work their asses off to pay mortgages on overpriced houses.
- kortilla 6y agoNo, asset prices are still lower than pre-covid crisis.
- gridlockd 6y ago...after having been inflated for years through low-interest rates and QE. Of course asset prices have taken a hit from an unfolding economic crisis - that's to be expected. Yet, the new money on the FED balance sheet (an extra two trillion as of late) is going somewhere. The cheap loans are going somewhere. It's going to prop up asset prices, no question about it.