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Thread: Current Fed Policy - For how long ?

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by eagle2 View Post
    I don't buy meat at the store that often. When I went to McDonalds for an Angus Burger meal yesterday, I paid about $7.50 for it, the same as I've been paying for as long as I can remember. When I went to Subway today for a 12' chicken sub, I paid about $7.80, the same price I've been paying for as long as I can remember. When I bought a gallon of milk, it was about $3.60, which isn't too different from what I usually pay. I stopped buying "natural" orange juice after I read about what goes into it.
    I repeat my question : WHERE is this magical Shangri La of yours ? Everyone else is paying higher food and energy prices. Except for natural gas and that is because of the explosion in supply coupled with static demand.
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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by eagle2 View Post
    It's not guaranteed inflation. Demand is down and there is a great deal of excess capacity in our economy. In some areas, housing prices are falling.


    Yes, the price of natural gas and oil are affected much more by supply and demand than by interest rates.




    Food prices were increasing in March as a result of supply and demand, not interest rates. There were major droughts last year, which brought down the supply, and the demand for food has been rapidly increasing in China and India.


    The Fed is doing what is necessary to keep the economy growing and prevent a double-dip recession. Right now the Fed is the only one that can do anything to stimulate the economy, since one of our major parties is doing everything it can to keep economic growth down and unemployment high. That's all I'm going to say on this to avoid turning this into a political discussion.




    Right now the biggest problems with the economy are slow growth and high unemployment, not inflation. One of the sectors hurting most is the housing sector. Keeping interest rates low will make buying a house cheaper. Low interest rates have also greatly helped with the recovery in the auto industry. Also, low interest rates will put more money in the hands of homeowners who refinance at lower rates. The Fed is doing the right thing by keeping interest rates low.
    Horsehockey !

    Yes it is guaranteed inflation unless we ignore every historical example and monetary law known to man. No country has ever been able to issue so much cheap money for so long without having to deal with major inflation somewhere down the line. Not today. Not tomorrow, but several years from now. For certain.

    The party that has suppressed growth, and PRIVATE sector employment, are the ones who use the donkey as their emblem. ( Yeah, yeah , this is -God help us ! - "Political" but I'm sick and tired of sitting on my hands while Eagle gets his free shots in while being factually delinquent or incomplete.) Who "postponed" the Keystone Pipeline project ? Conservative estimates say it would create 20,000 construction jobs and several hundred thousand subsidiary jobs. Who has presided over the lowest post-recession economic growth rate in our history ? What was the latest job growth number ? 170,000 - BELOW expectations and not enough to even dimple, let alone dent unemployment.

    Supply and demand is just ONE ( 1 ! ; uno ; a single ) factor in price. So is the weak dollar. And U.S. demand for oil is relatively low right now thanks to the weak recovery.

    If you were close to being right about the Fed and low rates then we would be seeing a boom in both housing and auto sales. We have seen neither and one reason is that too few people can afford down payments. Those that can't , if permitted to buy anyway are paying very high rates indeed.
    Last edited by Eric Stoner; 02-01-2012 at 09:03 AM.
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    Teddy Roosevelt

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    Default Re: Current Fed Policy - For how long ?

    Lol.....McDonalds has been raising prices..... You're just making it up again.


    By Associated Press, Published: January 24
    NEW YORK — Budget-conscious diners continue to flock to McDonald’s, but investors are beginning to worry about the fast food giant’s higher prices and upcoming expenses.

    ...................


    Higher costs for ingredients also continue to be an issue, even though costs for some ingredients, like wheat and corn, have leveled off. McDonald’s said it expects costs for most of its commodities in the U.S. to increase 4.5 to 5.5 percent in 2012, in line with 2011’s 4.9 percent increase. Last year, McDonald’s raised menu prices three times, for a total price increase of about 3 percent, in March, May and November.


    http://www.washingtonpost.com/busine...HNQ_story.html
    The country has been looted.

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    Default Re: Current Fed Policy - For how long ?

    The Federal Reserve has been able to export a lot of the expected inflation...... But prices around the world are rising...... It's just a matter of time till those prices get back to us.
    The country has been looted.

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by eagle2 View Post
    Right now the biggest problems with the economy are slow growth and high unemployment, not inflation. One of the sectors hurting most is the housing sector. Keeping interest rates low will make buying a house cheaper. Low interest rates have also greatly helped with the recovery in the auto industry. Also, low interest rates will put more money in the hands of homeowners who refinance at lower rates. The Fed is doing the right thing by keeping interest rates low.
    My issue isnt with low interest rates. My issue is with this declaration of not moving them until 2014. Alot of things can change in two years. Inflation is a creeping thing. At some point it will kick in and the little guy is going to be holding the bag.

    No one said he should increase interest rates. But by making this declaration the FED is saying they dont care about inflation with the little guy because they arent going to check it until it gets out of control. Combine that with the fact the average American isnt going to see it either until it is out of control; It is the makings of a run away train. No one knows it is out of control until it is going down the hill and cant stop.

    We could debate the finer points all day long but the bottom line is how the stage is set.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by Vamp View Post
    My issue isnt with low interest rates. My issue is with this declaration of not moving them until 2014. Alot of things can change in two years. Inflation is a creeping thing. At some point it will kick in and the little guy is going to be holding the bag.

    No one said he should increase interest rates. But by making this declaration the FED is saying they dont care about inflation with the little guy because they arent going to check it until it gets out of control. Combine that with the fact the average American isnt going to see it either until it is out of control; It is the makings of a run away train. No one knows it is out of control until it is going down the hill and cant stop.

    We could debate the finer points all day long but the bottom line is how the stage is set.
    MY problem is with BOTH. The unrealistically low rates AND the public statement that they will not go up. Add in all the money printing and I am pining for the days of "Blood and Guts" Arthur Burns lol.
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    Teddy Roosevelt

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    Default Re: Current Fed Policy - For how long ?

    Yes it is guaranteed inflation unless we ignore every historical example and monetary law known to man. No country has ever been able to issue so much cheap money for so long without having to deal with major inflation somewhere down the line. Not today. Not tomorrow, but several years from now. For certain.
    Didn't you read the memo ... The FED has figured out the way to 'export' price inflation right along with jobs @!

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by Eric Stoner View Post
    I have re-written and edited this at least three times to avoid the "politics ban".
    But you didn't. The whole purpose of this thread is to bash the Fed for not following your ideology.

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by Eric Stoner View Post
    I repeat my question : WHERE is this magical Shangri La of yours ? Everyone else is paying higher food and energy prices. Except for natural gas and that is because of the explosion in supply coupled with static demand.
    According to the article Melonie linked to, the Department of Agriculture estimated food prices increased 3.25% to 3.75% in 2011, which is not very significant.

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by Eric Stoner View Post
    Horsehockey !

    Yes it is guaranteed inflation unless we ignore every historical example and monetary law known to man. No country has ever been able to issue so much cheap money for so long without having to deal with major inflation somewhere down the line. Not today. Not tomorrow, but several years from now. For certain.
    You said that several years ago and we're not having any of the inflation you predicted.

    Quote Originally Posted by Eric Stoner View Post
    The party that has suppressed growth, and PRIVATE sector employment, are the ones who use the donkey as their emblem. ( Yeah, yeah , this is -God help us ! - "Political" but I'm sick and tired of sitting on my hands while Eagle gets his free shots in while being factually delinquent or incomplete.) Who "postponed" the Keystone Pipeline project ? Conservative estimates say it would create 20,000 construction jobs and several hundred thousand subsidiary jobs.
    The State Dept. estimates the Keystone pipeline will only create 5,000 - 6,000 jobs and a study by the University Global Labor Institute estimated the pipeline would add only 500 to 1,400 temporary construction jobs. The estimate of 20,000 is based on "job years", which means if a single person works 2 years, it counts as 2 jobs, and if he works 5 years, it counts as 5 jobs.

    http://www.cbsnews.com/8301-505123_1...ally-at-stake/

    Quote Originally Posted by Eric Stoner View Post
    Who has presided over the lowest post-recession economic growth rate in our history ? What was the latest job growth number ? 170,000 - BELOW expectations and not enough to even dimple, let alone dent unemployment.
    You seem only able to see things in the most simplistic terms, as if all recessions are the same. You don't seem to understand the severity of the recession we've gone through. There was $15 - $20 trillion in wealth lost. There is a huge surplus of housing.

    The whole basis of this thread is political. It should never have been started in the first place.

    Quote Originally Posted by Eric Stoner View Post
    Supply and demand is just ONE ( 1 ! ; uno ; a single ) factor in price. So is the weak dollar. And U.S. demand for oil is relatively low right now thanks to the weak recovery.

    If you were close to being right about the Fed and low rates then we would be seeing a boom in both housing and auto sales. We have seen neither and one reason is that too few people can afford down payments. Those that can't , if permitted to buy anyway are paying very high rates indeed.
    Again, you're oversimplifying things. Auto sales have gone up dramatically. Existing home sales are up too, but because of the huge surplus of housing built over the past few years, new construction sales are not increasing.
    Last edited by eagle2; 02-01-2012 at 10:39 PM.

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by Vamp View Post
    My issue isnt with low interest rates. My issue is with this declaration of not moving them until 2014. Alot of things can change in two years. Inflation is a creeping thing. At some point it will kick in and the little guy is going to be holding the bag.

    No one said he should increase interest rates. But by making this declaration the FED is saying they dont care about inflation with the little guy because they arent going to check it until it gets out of control. Combine that with the fact the average American isnt going to see it either until it is out of control; It is the makings of a run away train. No one knows it is out of control until it is going down the hill and cant stop.

    We could debate the finer points all day long but the bottom line is how the stage is set.
    It's still not set in stone what the Fed said. If circumstances change, the Fed can still raise interest rates before 2014. Based on the slow economic growth and high unemployment we're experiencing, along with the housing surplus, I don't expect there to be significant inflation anytime soon. There may be increases in the price of commodities as a result of the increasing demand from China, India, and other developing countries.

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    Default Re: Current Fed Policy - For how long ?

    The whole basis of this thread is political. It should never have been started in the first place.
    The FED is a privately owned institution, with zero official connection to the US gov't beyond the appointments of it's seven 'governors'. Like the Supreme Court, this appointment process supposedly assures 'total independence' in regard to policy decisions made by the FED board of 'governors'. Therefore, by definition, the FED cannot be political !
    Last edited by Melonie; 02-02-2012 at 03:18 AM.

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by eagle2 View Post
    But you didn't. The whole purpose of this thread is to bash the Fed for not following your ideology.
    Pushing "politcs" as far to the side as possible, it is not a question of ideology. It is nothing more than simple common sense based on thousands of years of monetary history.
    Too much money and too few goods = inflation. Where there is no incentive to save there are no savings. Instead, people search elsewhere for something to do with their money that gives them some sort of positive return. Right now that is the stock market which can go down as well as up although some stocks do pay dividends. Or it means that Americans send their money overseas in search of higher returns.
    Last edited by Eric Stoner; 02-02-2012 at 11:14 AM.
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    Teddy Roosevelt

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by eagle2 View Post
    You said that several years ago and we're not having any of the inflation you predicted.



    The State Dept. estimates the Keystone pipeline will only create 5,000 - 6,000 jobs and a study by the University Global Labor Institute estimated the pipeline would add only 500 to 1,400 temporary construction jobs. The estimate of 20,000 is based on "job years", which means if a single person works 2 years, it counts as 2 jobs, and if he works 5 years, it counts as 5 jobs.

    http://www.cbsnews.com/8301-505123_1...ally-at-stake/


    You seem only able to see things in the most simplistic terms, as if all recessions are the same. You don't seem to understand the severity of the recession we've gone through. There was $15 - $20 trillion in wealth lost. There is a huge surplus of housing.

    The whole basis of this thread is political. It should never have been started in the first place.



    Again, you're oversimplifying things. Auto sales have gone up dramatically. Existing home sales are up too, but because of the huge surplus of housing built over the past few years, new construction sales are not increasing.
    On the contrary. Except for the magic bubble of "Eagleland" , everyone else is paying higher prices for food , energy and rent while their wages have declined in real terms.

    Neither the State Dept. nor CBS news are reputable sources for anything, let alone economic projections. I am chomping on my tongue to keep from commenting on the very idea of letting the STATE DEPT. make decisions based on out of thin air projections that are contrary to EVERY independent analysis. The oil industry projections you can toss out ( they say 50,000 to 100,000 ) but what about the construction unions whose members will not get hired for this project ? They are none too happy to put it mildly.They projected AT LEAST 20,000 jobs for their members.

    You are correct about both the severity and one of the root causes of this recession. So what ? After the Carter-Reagan recession of 1980-3 we boomed with economic growth averaging almost 7 %. After the mini-recession of Bush The Smarter we boomed under Clinton. After the third Eisenhower recession we boomed under LBJ from 1963 to 1969.
    This is more like the failure to recover from the Hoover- FDR Depression when both dimwits RAISED taxes and increased regulation. If we have too much housing then WHY don't we bite the bullet and let the housing market crash and find its own level so it can FINALLY recover ? Instead we keep gving the hemorrhaging patient transfusions instead of repairing the damaged arteries.

    Auto and home sales have gone up ONLY in relative terms i.e. compared to the nadir where they were in 2008 and 2009. NOT compared to times of just average prosperity. Auto sales peaked in 2005 at 17 million. In 2008 they were 13.2 million. In 2009 , DESPITE "Cash for Clunkers" they dropped to 10.4 million. They rose to 11.5 million in 2010 and 12.8 million last year. BUT a large chunk of last year's sales were fleet sales as corporations and rental companie replaced inventory. The average age of cars on the road is still eleven years old !

    I am not going to apologize for this thread. It is both topical and highly relevant for ANY investor. If you are right, then maybe gold and oil are not such good investments and everyone should buy GM. If I am right, then sensible investors should anticipate serious inflation and invest accordingly.
    Last edited by Eric Stoner; 02-03-2012 at 10:05 AM.
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    Teddy Roosevelt

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by eagle2 View Post
    It's still not set in stone what the Fed said. If circumstances change, the Fed can still raise interest rates before 2014. Based on the slow economic growth and high unemployment we're experiencing, along with the housing surplus, I don't expect there to be significant inflation anytime soon. There may be increases in the price of commodities as a result of the increasing demand from China, India, and other developing countries.
    Yeah but Bernanke and the other doves on the FOMC are starting to lock themselves in just to protect the FED's own balance sheet as I have previously explained.
    A
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    Teddy Roosevelt

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    Default Re: Current Fed Policy - For how long ?

    FED Chairman Ben Bernanke just officially commented that 'inflation has subsided'. As a reminder, it's impossible for something to 'subside' to present levels unless it existed at higher levels in the recent past !!!

    http://www.federalreserve.gov/newsev...e20120202a.htm

    Also, keep in mind that recent price increases in commodities and raw materials have NOT all been passed on to consumer retail prices by manufacturers / wholesalers etc. This course of action was selected to avoid 'chasing customers away' due to 'sticker shock' of rapid retail price increases. However, this course of action also negatively impacted the 'bottom lines' of those manufacturers / wholesalers ... meaning that retail prices are likely to continue to experience slow increases even after the commodity and raw materials price levels have stopped rising.

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by Eric Stoner View Post
    Pushing "politcs" as far to the side as possible, it is not a question of ideology. It is nothing more than simple common sense based on thousands of years of monetary history.
    Too much money and too few goods = inflation. Where there is no incentive to save there are no savings. Instead, people search elsewhere for something to do with their money that gives them some sort of positive return. Right now that is the stock market which can go down as well as up although some stocks do pay dividends. Or it means that Americans send their money overseas in search of higher returns.
    The main problem with our economy is consumers aren't spending enough. You don't seem to be able to understand this. Increasing interest rates will reduce consumer spending more.

    After raising interest rates to record highs in the early 80's to fight inflation, the Fed dramatically reduced them after prices stabilized, and the economy grew and unemployment fell without inflation. Thus we don't even have to go back 30 years to disprove your "thousands of years of monetary history". Anyone with even the most basic knowledge of economics knows that if you want to increase economic growth and lower unemployment, you want low interest rates. This is simple, common sense. George H. W. Bush knows this, which is why he criticized the Fed for not lowering interest rates when he was running for re-election. The Republicans in Congress know this, which is why they criticized the Fed for keeping interest rates low and increasing the money supply. They don't want strong economic growth and falling unemployment when Obama is running for re-election. Even the moron Rick Perry knows this, which is why he made threats against the Fed for printing more money, when he decided to run for President. He doesn't want to run against an incumbent with a strong economy.

    What you are proposing doesn't make any sense. Before we continue with this conversation, let's see if you have an understanding of even the most simple economic concepts. Please answer these questions:

    If you want more people to buy houses, do you:

    A. Increase the cost of buying a house
    B. Decrease the cost of buying a house

    If you want more people to buy automobiles, do you:

    A. Increase the cost of buying an automobile
    B. Decrease the cost of buying an automobile

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    Default Re: Current Fed Policy - For how long ?

    ^^^ that's a Trojan Horse question ... and the answers aren't that simple.

    Also your assertion of 'consumers aren't spending enough' being the main problem with the US economy is flawed. Arguably the major problems in US housing and auto are related to too many consumers 'spending' borrowed money that they didn't actually have the ability to ever repay at full value !

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    Default Re: Current Fed Policy - For how long ?

    I am not a PhD economist or even an economist at all, but it seems to me what got us into this mess in the first place is people borrowing money to buy shit that they could not afford. Let me see if I understand this. Even though they (the FED) have been unsuccessful at this strategy for the last several years, the Ivy League geniuses at the fed still think the solution to the problem is to get people to borrow even more money to buy even more shit that they can't afford? Do I have this correct?

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by eagle2 View Post
    The main problem with our economy is consumers aren't spending enough. You don't seem to be able to understand this. Increasing interest rates will reduce consumer spending more. After raising interest rates to record highs in the early 80's to fight inflation, the Fed dramatically reduced them after prices stabilized, and the economy grew and unemployment fell without inflation. Thus we don't even have to go back 30 years to disprove your "thousands of years of monetary history". Anyone with even the most basic knowledge of economics knows that if you want to increase economic growth and lower unemployment, you want low interest rates. This is simple, common sense. George H. W. Bush knows this, which is why he criticized the Fed for not lowering interest rates when he was running for re-election. The Republicans in Congress know this, which is why they criticized the Fed for keeping interest rates low and increasing the money supply. They don't want strong economic growth and falling unemployment when Obama is running for re-election. Even the moron Rick Perry knows this, which is why he made threats against the Fed for printing more money, when he decided to run for President. He doesn't want to run against an incumbent with a strong economy. What you are proposing doesn't make any sense. Before we continue with this conversation, let's see if you have an understanding of even the most simple economic concepts. Please answer these questions: If you want more people to buy houses, do you: A. Increase the cost of buying a house B. Decrease the cost of buying a house If you want more people to buy automobiles, do you: A. Increase the cost of buying an automobile B. Decrease the cost of buying an automobile
    You forgot option C.: Decrease the price of a house.
    Last edited by safado; 02-05-2012 at 12:10 PM.

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    Default Re: Current Fed Policy - For how long ?

    Part of the master plan in keeping rates so low for so long (Savers be damned)...... is to allow the banks to get healthy..... Not only do banks make money on the spread (The difference between Treasuries and their cost to borrow from the Fed) The Fed is actually paying interest on the reserves the banks keep at the Fed...... Truly Bizarro World...... Also these low rates help this countries borrowing costs low......

    All this money creation only really helps those closest to it.
    The country has been looted.

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    Default Re: Current Fed Policy - For how long ?

    ^^^ and besides zero interest rate policy being an ongoing 'stealth' bailout for the big banks, the resulting 'devaluation' of the US dollar helps rich investors / speculators in other ways ... such as increasing the price of gold, oil, and other commodity investments. To some degree the resulting US dollar 'devaluation' also directly translates into rising US stock prices. And the resulting US dollar 'devaluation' also helps the overindebted 'poor', by decreasing the true value of the debts they owe. However, it is arguably not helpful at all for those Americans who have been financially 'responsible' ... i.e. savers and 'value' investors, those who have avoided going heavily into debt, etc.

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by safado View Post
    I am not a PhD economist or even an economist at all, but it seems to me what got us into this mess in the first place is people borrowing money to buy shit that they could not afford. Let me see if I understand this. Even though they (the FED) have been unsuccessful at this strategy for the last several years, the Ivy League geniuses at the fed still think the solution to the problem is to get people to borrow even more money to buy even more shit that they can't afford? Do I have this correct?
    What caused the financial crisis was lenders providing mortgages to people to buy homes they couldn't afford, with no money down. What caused the dramatic economic decline and increase in unemployment was that consumer spending fell significantly. See the chart below:



    The red line shows consumer spending. Notice how much consumer spending fell at the same time the economy was contracting and unemployment was going up. Do you think that if consumers reduce spending again, the results would be any different?

    In early 2009, before the Fed and the government did anything to stimulate the economy, we were losing 700,000 jobs a month. We're now gaining over 200,000 jobs a month.

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by safado View Post
    You forgot option C.: Decrease the price of a house.
    Decreasing the price of the house would fall under option B, decrease the cost of buying a house

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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by Melonie View Post
    ^^^ that's a Trojan Horse question ... and the answers aren't that simple.
    Yes they are.

    Quote Originally Posted by Melonie View Post
    Also your assertion of 'consumers aren't spending enough' being the main problem with the US economy is flawed. Arguably the major problems in US housing and auto are related to too many consumers 'spending' borrowed money that they didn't actually have the ability to ever repay at full value !
    That's not happening now. Banks and other lenders are much more careful about whom they're lending money.

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