Perilous Times For Housing Market

The conventional wisdom that some financial institutions or forces are 'too big to fail' will not hold true for housing: according to Peter Schiff, Fed governor Ben Bernanke is gambling with the problem of the housing bubble, not addressing it.

1 minute read

March 3, 2006, 12:00 PM PST

By Michael Dudley


"Through the wealth effect and cash-out equity extractions, the housing bubble has enabled Americans to consume far beyond their collective means. The result is a bubble economy, where incomes, jobs, tax revenue, corporate earnings, and the solvency of our lending institutions, are all dependent upon sustained, stratospheric home values. When prices return to earth, the economic impact will be catastrophic.

This dismal reality is certainly not lost on those in Washington. The only way for housing prices to stay high is for the Fed to keep inflating. Conveniently, the captain currently at the helm of the monetary ship of state just happens to be Ben Bernanke, who as a Fed governor spoke about the Fed’s ability to fend of deflation by using the handy invention of the printing press. Though his words may have may have spoken in reference to consumer prices, his actions will certainly be concentrated on asset prices, especially housing."

Saturday, February 25, 2006 in PrudentBear.com

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