Originally Posted by
Aaron
Was it the RBNZs job to ensure house prices did not drop 10% prior to the pandemic over reaction. To quote Bill Bonner, you need to replace "wall street" with "house prices" for NZ
As it is, the Fed faces a grim choice. Inflate or Die. Either it backs off and allows the bubble economy to die…with a crash on Wall Street, recession, bankruptcies, unemployment, and all of the other nasty things needed to correct its own policy mistakes. Or it protects the gains of the rich and the powerful by continuing to inflate the economy.
The inflation option postpones the reckoning…but it increases the pain. And it destroys the middle class. The poor get inflation-adjusted handouts. The rich have their assets, their hedges, and their hustles. But the middle classes sell their time by the hour. Prices go up. Real wages go down. Jobs disappear. And houses, where the middle classes keep their savings, become debt traps. As prices rise, families borrow heavily to buy them.
Not sure how it ends, but you can be sure inflation will remain part of the solution. I quote Bill again and it applies to America but the Western world is pretty much following the same path.
Remarkably, the Fed’s key lending rate remained under the inflation rate for the whole period 2008–23 to today (excepting a few months in 2019).
You only need to read the latest discussion on the Argosy property thread to see how most "investors" are thinking about interest rates, and they have been right for the last 30 odd years and there is nothing to indicate this will change. Current real negative interest rates will remain and go more negative as soon as it is possible to do so.