3 ms·

> low, predictable inflation rates It seems to me that tripling the monetary base and investing two parts of it in MBS is going to have an inflationary effect

• arcticbull 5y ago
  To be clear, I don't think you're being obtuse at all. Fractional reserve lending means that an increase in the monetary base is a result of lower interest rates - money supply operates on a pull model not a push model. Lower interest rates mean a more expensive house costs the same per month when mortgaged, which in turn increased the outstanding supply and balance of mortgages, hence new money. Lower interest rates increase the price of houses, but to a much lower extent the affordability of those houses - which is more likely to be measured on the monthly cost of a 30 year fixed loan. It will move the goalposts on down payments, however, but down payments are only 2-20% of the cost of the house. In my opinion, however, I believe zoning to be a much bigger contributor to overall affordability.