Flipping Burgers Instead of Condos -- Ouch!
There's still more discussion regarding whether the Fed is (privately) targeting the housing bubble. If the Fed is truly concerned with the "average American", Boobus Americanus, and therefore the average affordability of housing, what does that portend for those real estate markets that are at the extreme of the housing bubble? I don't know (but I have a good idea). I'm just throwing it out there in the hopes that the 800 to 1000 weekly readers of this blog post a comment.
"The mighty Federal Reserve. It's more powerful than a ballooning housing market, able to stop inflation in a single bound. And, if it slips, if it uses its super powers unwisely, if it goes too far, it could push the economy into recession with just a nudge of its pinkie."
"While investors are growing impatient with the Fed's rate hikes, it's important to remember that at the start of this tightening program, rates were at a 45-year low. "It was like war time," Krosby said."
"Citigroup's chief global equity strategist, Ajay Singh Kapur, quotes a market adage, 'Economies don't die of old age, they are always murdered by the central bank.' Eight of the last 12 recessions were preceded by Fed rate hikes, he said, a figure that is mentioned and repeated often by the 'all-powerful Fed' school of Wall Street strategists these days."
"This is nonsense, said Sandy Lincoln. There are factors that are far beyond the Fed's control, Lincoln said, such as the introduction of the euro, the globalization of the economy and the current sharp increases in commodities prices."
"What the Fed is trying to do is take the air out of the housing bubble, slow down the larger economy and see employment edge slightly lower."
""The key is a slowdown, not a crash," she said. Still, when the Fed has finished, people will get hurt, she said."
"Speculators could be in particular trouble. "The more leveraged you are, the more vulnerable you are to losing," she said. "Instead of flipping condos, you could be flipping burgers -- and I don't think the Fed cares. What the Fed cares about is the average American.""