As the generational war heats up, we should all remember the source of all the bubbles and all the policies that could only result in generational poverty: the Federal Reserve.
Federal Reserve chair Janet Yellen recently treated the nation to an astonishing lecture on the solution to rising wealth inequality--according to Yellen, low-income households should save capital and buy assets such as stocks and housing.
It's difficult to know which is more insulting: her oily sanctimony or her callous disregard for facts. What Yellen and the rest of the Fed Mafia have done is inflate bubbles in credit and assets that have made housing unaffordable to all but the wealthiest households.
Fed policy has been especially destructive to young households: not only is it difficult to save capital when you're income is declining in real terms, housing has soared out of reach as the direct consequence of Fed policies.
Two charts reflect this reality. The first is of median household income, the second is the Case-Shiller Index of housing prices for the San Francisco Bay Area.
I have marked the wage chart with the actual price of a modest 900 square foot suburban house in the S.F. Bay Area whose price history mirrors the Case-Shiller Index, with one difference: this house (and many others) are actually worth more now than they were at the top of the national bubble in 2006-7.
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1 comment:
You're a fool to purchase a house right now, unless you're paying cash or getting an unbelievable deal around 1/2 of the current market rate.
The Fed can't keep rates this low forever, and when they go up, prices will have to fall to accommodate the need for an affordable monthly payment. Buy now, and you'll be underwater and stuck. Buy after rates return to a market based number, and you'r principle will go down while your tax benefits will increase.
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