The infamous financial crisis in the late 2000s caused a fundamental shift in the role of The Federal Reserve and Federal government. The cause of the financial crisis? One of the root causes was loans to subprime households coupled with the now famous ALT-A (aka, NINJA loans) which helped fuel a price bubble that burst.
Home prices in the USA (according to FHFA’s purchase-only index) is growing at 12.2% year-over-year, a rate even higher that during the 2000s housing bubble. Like in 2005, there is a visible spread between home price growth and wage growth. The spread today is even larger than in 2005.
Today’s home price growth is not due to ALT-A or subprime lending, but rather due to staggering amount of money available. The Federal Reserve under Ben Bernanke intervened in late 2008 to purchase assets and lower interest rates. But The Fed never went away and only increased their footprint, especially with the Covid epidemic.
With massive support of The Federal Reserve, US public debt has soared to near $28 trillion, up from $9.5 trillion in mid 2008. That is almost a 3x growth since 2008.
Money velocity (GDP/Money stock) has crashed to historic lows since the financial crisis and housing bubble.
Inflation? At 4.2%, the highest growth in consumer prices since The Great Recession.
The economy has been turned over to The Federal Reserve … and the Biden Administration. As opposed to a free-market economy, we how have the Fed’s “Green Man” economy.
