Government manipulation of interest and real estate prices

WE HAVE SEEN THE BOOM GET READY FOR THE BUST 

THE MANIPULATION IS NOTHING MORE THAN FRAUD

It seems that the nation has never really recovered from the mortgage debt crisis of 2008. In fact, the efforts of the Federal reserve to paper over and stimulate markets to give the appearance that all is well has just set the world up for the next economic crisis.

Consider that the Federal Reserve has artificially manipulated interest rates for the past 15 years to keep the economy going. Denying savers of any return on their savings and inflating the value of paper assets and real estate. At the time Ben Bernanke, the head of the Federal Reserve stated that the only cure for the mortgage crisis was to increase real estate price to stop the bleeding. 

Remember that the original crisis was crated by government pressure to loan mortgage money to buyers who really did not have the ability to repay the loans. Government interference in the markets always creates disaster.

While driving interest rates, down they have also bought over $5.7 Trillion in Treasury debt and they also have purchased $2.7 Trillion in Mortgage debt and real estate investment trusts. This is called quantitative easing, a fancy word for government propping up treasury debt and stimulating real estate prices.

This, coupled with the Biden administrations energy policy and near $9 Trillion in domestic spending has exploded into an inflation that will not be easily tamed. The federal reserve is now in a position that raising interest rates will create a bust on many fronts at once. It is a fact that they are way behind the curve on raising rates to tame inflation. One problem is that increasing rates will cool the appetite for home buying, which may put lots of buyers underwater and the inflation will stretch already tight budgets. Real estate can only soon be going in one direction, down.

Then of course the cost of servicing the federal debt, which is increasing by the day, with giveaways both at home and around the world will become untenable. It is likely that the interest on the debt will soon be a 1/3 of the budget.

The Federal Reserve also claims that will be lowering their balance sheet of these assets that will also cause a raise in interest rates and affect debt activity. All these factors are a result of government manipulation to sustain good times without washing out malinvestment.

A free market will make excessive and speculative investment a dangerous practice, as the market will correct, wipe out these excesses all by itself, which is a great learning experience that debt has consequences and excess debt and speculation has disastrous consequences. This is as it should be.

Government manipulation and intervention has just prolonged and magnified the problems that will be paid for one way or another. Rather than a correction that will restore stability, it will make the problem much worse.