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The Fed has been consistently wrong over last decade in many of their policy, and their credibility is on the line. The reason home prices are not on line with

• juanani 5y ago
• nopenopenopeno 5y ago
  Their only option is to be wrong. At the end of the day, the fed has an impossible job to do.
  • spaetzleesser 5y ago
    I still remember Bernanke’s pronouncements before the 2008 crash that everything is just fine. It’s hard to not conclude that they either aren’t very competent or are playing political games.
    • JumpCrisscross 5y ago
      > remember Bernanke’s pronouncements before the 2008 crash that everything is just fine The Fed chair saying "we're fucked" is, on its own, enough to cause a credit crisis. (This is why the Fed doesn't tend to make blanket forward-looking statements like "everything is just fine.")
      • deleted 5y ago
        [deleted]
      • spaetzleesser 5y ago
        I am not aware of them silently doing something about the mortgage bubble either.
  • notch656a 5y ago
    They can be dissolved. The constitution does not require a central bank.
    • nopenopenopeno 5y ago
      • posnet 5y ago
        I wonder about these grand conspiracies. I am on the fence as to whether the world is controlled by a global elite of super geniuses stealing from the unwashed masses. Or whether the people in charge actually are just wildy incompetent. I'd say the evidence supports both.
        • tmn 5y ago
          Lying is not the same as incompetent. Also they have to pretend (lie) that they can do something impossible. They are not incompetent. The fed chairs are quite intelligent, but they are not running the show.
        • yhoneycomb 5y ago
          How is this a "grand conspiracy"? People are going to manipulate things in their favor as much as they have the power to do so. Oligarchs in America and elsewhere have the most power, and thus do the most manipulating. Also, it's no secret that the vast majority of wealth is concentrated in the hands of a few oligarchs.
          • vmception 5y ago
            As soon as they ever compete against each other, it's the same as none existing at all. That's the easiest way to dismantle that particular grand conspiracy. The most pragmatic approach is to understand that they don't rely on voting to get their way. But they absolutely compete for resource appropriation and their special interest. It is better if they act like gods of their particular domain or sector, so they can exert control over just that and not compete. But it also reinforces that they cannot and do not coordinate much together.
  • vmception 5y ago
    Oooh, nice, this has levels to it. 1) The Fed should create the outcomes such that their predictions were wrong 2) While also just having a bad interpretation of data to begin with 3) The Fed is only imagining that its toolkit can cause a specific outcome for economic growth, but it cannot cause humans to transact a certain way or predict what a large group of humans (or large pool of capital) will do. No economist can, and the other economists don't have an infinite balance sheet to try to influence it either. 4) The Fed was never asked to or mandated to do the things it does to stimulus the economy. (Caveat, the stimulus bills in 2020 are a major exception). The Fed just notices that nobody can stop it. Similar to the Supreme Court realizing that and testing it in Marbury v Madison. Congress lacks consensus on it and everyone is afraid of the alternative (Congress having to deal with monetary policy themselves, politically).
    • datavirtue 5y ago
      I agree. Congress is paralyzed (far more than the usual) when it comes to monetary policy and financial services regulation. It's officially their job but not their wheel house. Unsettling.
    • pxue 5y ago
      the job of the Fed is a proven impossible one. Their job is to nudge the entirety of the economy towards one or two of the Fixed Exchange Rate, Free Capital Flow, and Independent Monetary Policy at any given time, but never all three at once. https://en.m.wikipedia.org/wiki/Impossible_trinity https://en.m.wikipedia.org/wiki/Impossible_trinity
• deleted 5y ago
  [deleted]
• closeparen 5y ago
  There is every reason that macroeconomic conditions would affect the value of land, but relatively silly and incidental reasons that the price of land would be so strongly coupled to the price of a home to live in (itself a depreciating commodity).
• onlyrealcuzzo 5y ago
  > No wonder even institutions are now buying, in fact one in every 3 SFHs in US are now owned by institutions. Source?
  • stonogo 5y ago
    You won't get a source because it's misinformation. There are US cities wherein one in every three single-family-home purchases were made by investors last quarter: https://www.redfin.com/news/investor-home-purchases-q4-2021/ https://www.redfin.com/news/investor-home-purchases-q4-2021/ so perhaps OP was referring to that.
    • onlyrealcuzzo 5y ago
      I was gonna say - it's nearly impossible for the home ownership rate to be ~65% and 1/3 SFH also owned by institutions. The vast majority of rental stock is not SFH, and the vast majority of rental homes are owned by mom & pop's.
• gitfan86 5y ago
  I think crypto has played a role in educating more people to how bad it is to hold USD, low interest rates, printed money combined with that are a recipe for people to get into bidding wars and fomo. Ironically this is bad for Bitcoin because it is denominated in USD. Maybe Bitcoin does go to 1M, but only after a loaf of bread costs 1k. I'm not suggesting anyone go out and buy a 2br house for 3 million dollars, but I do think that real estate will hold it's value in general much better than USD.
  • dclusin 5y ago
    Until the alt coin they were emotionally invested in loses 80% of its value. Then the stock market and USD don't look so bad.
• JumpCrisscross 5y ago
  > Fed has been consistently wrong over last decade in many of their policy, and their credibility is on the line This is hyperbole. The Fed, by and large, held the American economy together through the financial crisis and more remarkably the pandemic. Until now, neither of those produced meaningful levels of inflation. To say "their credibility is on the line" is to disagree with a multi-trillion dollar bond market taking the Fed's every word very much seriously. > the same Dallas Fed chairman This is the Dallas Fed's leadership [1]. None of them authored this article, certainly not the (interim) president, Meredith Black. If you want the dry stuff, what the Fed is actually saying versus its individual researchers, consult the beige book [2][3]. [1] https://www.dallasfed.org/fed/leadership.aspx https://www.dallasfed.org/fed/leadership.aspx [2] https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm https://www.federalreserve.gov/monetarypolicy/beige-book-def... [3] https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20220302.pdf https://www.federalreserve.gov/monetarypolicy/files/BeigeBoo... March 2
  • datavirtue 5y ago
    I agree. Prominent investors, scores of former and current federal reserve analysts and directors, traders, and many others have been begging congress for financial regulation--before and after meltdowns. Many of those mentioned above have offered direct, specific advice on what to regulate and how to do it. Crickets...for decades.
  • stjohnswarts 5y ago
    Yeah the only people I've seen that say the Fed is useless have been anarchists and libertarians and gold bugs.
  • aaaaaaaaata 5y ago
    The gears kept turning, doesn't mean irreparable damage wasn't done. Central planners in the USSR were probably lauded by some subset of the citizenship, too. Doesn't mean it wasn't a sham.
    • throwoutway 5y ago
      I wouldn’t call it a sham. I think I’d rather some centralized orchestration of modern finance than none. Im not claiming that centralized Fed is perfectly wise, nor we should be subservient too it. But I also don’t want to live in a non-government state with no financial system.. an example that comes to mind is Somalia.
• vkou 5y ago
  > The Fed has been consistently wrong over last decade in many of their policy, and their credibility is on the line. Considering that after 2008 and 2020, we did not end up living in a weird Mad-Max blood-covered hellscape, trading bottlecaps for hits of zyme and ammunition (Which would have been the likely ideological outcome of 'just let the whole economy fail'), I think the Fed has weathered the past two decades fairly well.
  • gitfan86 5y ago
    I recently read a book that was basically a diary of a businessman from the great depression with some commentary. It seems like there were two big problems that we have done a good job avoiding since then. #1. Way too many people were rich on paper and with margin. #2. Once the economy started to collapse everyone panicked and tried to avoid spending money, which causes a negative feedback cycle. 2008 was similar to issue 1, but we avoided step 2 by bailing out the banks and auto companies that should have collapsed.
    • vkou 5y ago
      > bailing out the banks and auto companies that should have collapsed. 'Should' is doing a lot of work in that sentence. Should a business that's selling $10 bills for $9 collapse? Yes, that's pretty obvious. Should a business that's consistently selling $10 bills for $10.05, but requires access to short-term liquidity that completely evaporated overnight to function, and is now not functioning, because some other unrelated part of the economy is sick, and all flow of credit has stopped? Should that latter business fail? Who's going to be better off for it failing? Even if killing that business will create an economic catastrophe, as well as a mountain of geopolitical concerns that are the consequences of de-industrialization? [1] On a metric of anything but ideological purity, the fed stopping the economic collapse where it did was a bargain at twice the price. [1] Just ask Russia in 2022 how well de-industrializing all of its inherited Soviet economy has worked out for it. It's now in the unenviable situation where its domestic production can't even sustain a Soviet-era standard of living, without relying on now-sanctioned foreign trade. All because it hyper-optimized on growing the 'productive' parts of its economy (Oil, oil, gas, oil, and gas), and let the unproductive parts (all that old, crappy, internationally uncompetitive Soviet industry) rot away.
• brian_cloutier 5y ago
  This is a dumb question but... does housing have fundamentals? There's a demand curve of renters willing to rent housing at different price points and I can see how this would put a lower-bound on housing prices, but why should there be any upper bound? When you buy a house you intend to live in there is no associated revenue stream, and the only return you can hope for is your expectation that someone else will buy the house from you for more in the future. Maybe you can quantify that return, by modeling a rising population and municipalities which are slow to add housing? It still feels like housing is worth what other people are willing to pay for it, that's the fundamental.
  • 88913527 5y ago
    I think it does have fundamental value. A stock's fundamental value is in its expected lifetime returns. For a home, it's the value of having shelter. Some areas are better to have shelter than others (favorable climate, access to a job center, etc).