E For All You Inflation Fearmongers, Dr Lambert Has An Answer

I wrote awhile back that movements in lending practices would help facilitate the housing bubble of the future. The Consumer Financial Protection Bureau has been limited, as I predicted, since that article was written. No longer will it be possible to sue banks for lending recklessly to people who cannot pay loans back. That is a huge step towards another housing bubble.  

Now, I have noticed that in some cities, like Las Vegas, many houses are sitting empty. The demand for those houses as rentals is extremely weak. The only way many real estate investors are going to gain a payoff in housing is through a bubble, through easy money pushing prices to the stratosphere. That will be the financialization of slow job growth into a short window of big job growth. 

Banks may be weakened if those investors fall flat. So it may be that a housing bubble will get the banks off the hook. Nothing in finance happens unless it rescues banks first. 

Also, people have short memories, so they forget the bubbles and crashes of the past and want bubbles for the future. Those who believe that financialization solves everything will get their boost in jobs and in demand if the easy money bubble materializes. The question is how long will that boost last and what damage will it do when it comes crashing down?

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Disclaimer: I have no financial interest in any companies or industries mentioned. I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice. The ...

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Bill Johnson 3 years ago Member's comment

Good read, thanks.

Gary Anderson 3 years ago Author's comment

Thanks, Bill, and I just published an article about capacity utilization and where our economy may be going if business does not adjust. www.talkmarkets.com/.../is-usa-low-capacity-utilization-low-enough-to-prevent-recession