[quote=The-Shoveler]OK I will take a stab at it knowing full well I am about to be flamed.
If they raise interest rates without wage inflation then the housing market will crash followed by state and city bankruptcies one after the other because their main source of revenue is property tax.
This will cause a lot of other economic issue etc…
A lot of people I think fail to put two and two together and think housing crash existed in some sort of vacuum.[/quote]
The fed isn’t going to raise interest rates. It’s going to be those that hold bonds, coming to the realization that they aren’t going to get paid, that’s going to raise the interest rates.
I think city bankruptcies are inevitable and declines housing are likely too, but I don’t know that it will be a crash. There’s too much debt in the system and I think it will be defaulted on rather then inflated away. I could be wrong but there’s so many people playing the lever up and bet on inflation game that I think they are going to end up being the losers.
The thesis has always been that the fed can create the right level of inflation and fix the debt problem. My bet is that they can’t and those people expecting them to be able to do so are wrong. Congress fiscal policy might be able to trigger hyper inflation but the fed cannot.
