Federal Reserve Will Not Protect Housing Run Up Gains
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Found through one of my favorite reads, the Northern New Jersey Real Estate Bubble, has an interesting post on the shifting of the Federal Reserve in managing the monetary supply.
In the past under Greenspan, the Fed would have aggressively tried to protect the asset gains of the owners of bubble bought homes, but in a speech by Fed Governor Donald Kohn, a signal was sent informing the population that the fed will allow market forces to work and not protect these buyers.
Now it obviously is not the case. As Grim States,
This is a big one folks. One of the greatest concerns with bubble sitters was that the Fed would drop rates dramatically to protect home price gains. The drop in rates would push mortgage rates low and reignite the boom. The Fed is making it very clear that it will not act to protect housing prices. This is without a doubt one of the most significant articles released to date.
Well said…
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