[quote=flu][quote=CA renter]
If you can hold all other variables constant, then asset prices — especially those that are dependent on credit, like houses — would fall when rates rise. If you doubt this, ask yourself why the Fed has been hammering rates down during the entire housing/credit bubble bust.[/quote]
Um… historical data doesn’t seem to support this…Between late 70ies to mid 80ies, didn’t interest rates rise from roughly 9% to 18%? But during that period, home prices gained 30%….
Any financial gurus can offer an explanation?[/quote]
It was in my post, above:
[quote=CA renter]
There is not always a 1:1 correlation between interest rates and asset prices (like houses), but that’s because there are many other variables in play. In the 70s and 80s, you had women entering the workforce en masse, and Baby Boomers were entering their peak buying years. This pushed the prices of assets up even though interest rates were rising. We are on the opposite end of that situation now, though, which is why I am a deflationist…while also acknowledging the potential for a currency crisis of sorts.
[/quote]
