Wednesday, June 29, 2005

Point/Counterpoint on the Real Estate Bubble

This is a relatively old post, but has nice, juicy data on the money supply.

Some interesting factoids:

  • The money supply grew by about 50% in the 1990's, but more than doubled in the 1980s, after tripling in the 70s.

  • But, as the author of that blog notes:

    But between Jan. 2000 and April 2005 (5 years 4 months) the Federal Reserve increased the money supply by a like amount: $3,011 billion.

Clearly the Fed is goosing the money supply but it appears to be an attempt to forestall a huge crash.

Meanwhile, evidently Charles Schwab, as of Q2, was still in denial over the existence of a real estate bubble.

The reasoning in that article is beautifully circular: household net worth is going up because the value of houses are going up, and therefore justify the higher prices of homes people are paying.

And, price/income levels aren't as bad as that in countries where the bubble has already burst.


No comments: