Friday, January 23, 2009

Inflation IS coming, house values still decline

The Fed's FOMC meet's next Wednesday... I don't expect the Fed to reduce rates the remaining 25 Basis Points (1/4%) to zero.

It's been my position, that it's not a case of the cost of credit causing the credit crisis, it's a case of the lack of liquidity causing the credit crisis... and the resulting decline in value of residential/commercial property.

What lender in his/her right mind would lend against collateral that is declining in value! Politicians and Government..wake up! The problem is the value of every American home is declining.
Stop that decline by giving the Federal Reserve Bank the mandate to buy the mortgage on every residents primary residence and replacing it with an affordable mortgage at a 4% rate for 30 yrs based on the owners ability to pay, and you have a chance of stopping this death spiral.

So... In my mind... I didn't see the need to cut rates all along, and especially not to near zero!

But, the longer we're here at near zero, the better the chance is for soaring inflation by 2010!

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