Presidential election, 2016

[Warren Dew]

(11-14-2016, 03:10 AM)Eric the Green Wrote: I don't figure how lower housing prices caused higher stock prices. Where is your evidence that people who own "underwater" homes invested in stocks?

Eric, I'm afraid I was using terminology that assumed a context of Austrian economics, which may have caused some misunderstanding.  Let me address this question, since you asked it explicitly.

I'm certainly not claiming that people who owned "underwater" homes invested in stocks.  What I'm saying is that the Fed's easy money policy - QE 1, 2, and 3 - helped keep many homes from going underwater by supporting home prices; however, that same easy money policy also inflated stock prices above where they would otherwise have been.  Eventually the stock prices will need to fall back to their real value, so basically the cost of helping some homeowners avoid bankruptcy is that some different people who are stockholders will eventually face portfolio losses.