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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous] [quote]

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms.  Honestly, I expect the inflation.[/quote]

Welcome back tin-foil hat wearing, QE man.

So, inflation will deflate housing prices in nominal terms (that's a quote!)? It doesn't take a professional economist (despite me being one) to tell you that you don't understand the words you're using. [/quote]

As a professional economist, you foresaw the housing bubble in 2005/2006? Because I did, long before it was cool.

I am not as sure about this one, honestly.  But things are definitely funny and all this intervention is... troubling.

No need for name calling, though as a professional economist who seems to take this discussion personally, do you work at the Fed?  You can tell Yellen she has a fan here! I think she is going to really shakes things up to get jobs growing again.[/quote]

Not personal at all. I was just trying to emphasize that the statement "inflation causes nominal prices to decline" made no sense.

No, I didn't even remotely see the crisis coming. To be fair, I wasn't looking, but I'm not naive enough to think that I would have spotted it even if I was looking.

I think it's odd that you think QE propped up the value of housing but not the value of other assets. That may be correct, but you're walking a fine line in order to get to this conclusion.

Finally, again, the taper should curtail the inflationary headwinds. You seem to believe that the taper will exacerbate inflationary headwinds. Regardless, the real fear, unless you're in a developing market (or invested heavily therein) is deflation. The Fed would like to see more inflation than we currently see. The fact that inflation remains so slow despite so much stimulus suggests there remains significant weakness in the economy. That's a real concern.

My guess is that when all the dust settles, perhaps by 2020, we'll recognize this period as akin to the Great Depression. We may well marvel that things never got worse than they did. [/quote]

Thanks for your thoughtful response.

Oh, I definitely feel QE is inflating all assets; but most of us mere mortals don't own enough stock or commodities that it would matter.  Even for folks with large 401ks most of them should be in conservative funds now and haven't really enjoyed any benefit from QE.

Yes, I agree, taper should curtail inflationary headwinds, and if Fed does nothing then I expect housing prices (and assets) to decline.  My expectation for inflation to run amuk is based on assumption the Fed will take further different action to prevent housing prices from falling in nominal prices (though they may fall in real dollars if inflation is high -- I really think I have this right here, maybe spell out where I am explaining this wrong).  Ie, your houses never drops below $1M, but bread costs $500 and you make $200k a year as school teacher. Prices don't drop in nominal terms, but the real value has fallen considerably.  That is the outcome that I think the Fed is trying to engineer, since when headline numbers for house prices fall, people freakout.

Totally agree that this current period is really really bad.  Deflation is a real risk, and the economy is generally really too weak considering all the stimulus that has been thrown out it.  I am hoping Yellen takes a different tack, such as only offering to buy bonds issued by municipalities tied to job program type projects with specific hiring requirements (kind of like a Fed administered New Deal work program).  Honestly, I'm not sure if they are allowed to make those kind of purchases, but since they are buying all sorts weird mortgage products I suspect some path could be found. Yellen is fairly daring from what I can tell.

As for the total lack of inventory, I think lack of job mobility and little retirement savings is big reason, but really feel it is all a supply problem.  There is no new buyers, and I really am curious what jobs are growing here in DC?  The budget that passed didn't really change anything, legislature is deadlocked, defense is cutting back, so what am I missing?[/quote]

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