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All valid points. But I beg to differ that low rates have nothing to do with QE. What brought the rates down to current levels was QE and the treat of subsequent rounds of QE. When the gov't charges trillions on its credit card and still carries a $4 trillion+ balance it's hard to say that they played no role in the low interest rates today. And Europe started a $1.3 trillion QE round just a few months ago not to mention the $800 billion a year Japan is printing. What's keeping rates low is as you pointed out the perceived economic environment. Both this and Europe and Japan printing money and devaluing their currencies have investors betting against a rate increase in the immediate future and some believe that it might warrant QE4 which I doubt is needed.
I don't deny that many benefited because of QE, I benefited myself with my sub 4% mortgage. But I will not deny that it benefitted me more than the poor who aren't in a situation to take advantage of it.
In addition because of QE pushing down yields you have all the funds/investors chasing after what little yield they can find. Lots of money is going into Emerging Market debt, and other junk rated securities as well as pumping up real estate. When you have institutional investors buying up everything from condos and even single family homes guess what it drives up the real estate prices. And as a homeowner if your property value increases or if you paid a lot for you property you'll want to charge higher rent. Sure you can say people will just walk. But due to various factors the demand for rentals especially in major cities appear to be inelastic to both the price of rent as well as people's income. Merely linking rent prices to the quantity of demand for rentals without regards to other factors driving up the price of real estate which in turn affects the rents for said properties just doesn't make sense.
the point is that your comment about the printing of money and qe2 inflating things is wrong . qe has nothing to do with the printing of money.
"DEFINITION of 'Quantitative Easing'
An unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity. Quantitative easing is considered when short-term interest rates are at or approaching zero, and does not involve the printing of new banknotes.
To launch a QE program, the central bank creates electronic money: this process is the part that's often termed "money printing", but no cash is actually created. The typical form of QE, which sometimes gets called "sovereign" QE, is when the central bank buys government bonds on the open market. Bondholders get cash — which the bank hopes they'll pump elsewhere into the economy — and the bonds get added to the bank's balance sheet as assets.
Last edited by mathjak107; 05-08-2015 at 02:54 AM..
No such thing as a little bit of deflation. It can lead to the death spiral that is very very difficult to get out of.
That is why all central banks want to avoid it like the plague.
HOUSING DEFLATION ALMOST DESTROYED US. in some shape or form 1 out of 4 jobs are linked to either home building , home renovations or spending on ones home.
Look at where deflation got Japan. Over two decades of disaster, and Japan still hasn't really recovered.
Yes, this is not news anymore. Who hasn't heard of the lease that automatically goes up by 5% every year? On the other hand, how many people's paychecks go up 5% automatically every year?
but of course folks like to blame anything and everyone for something that goes on year after year regardless.
sometimes things go up more or sometimes less but it has zero to do with the qe's.
if you want to pin anything on the low rates pin the fact that with demand as high as it is and commodity prices low if costs were higher rents would be going up even more.
there are more renters now than ever before as less and less can or want to be owners.
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