Rising asset prices is not the same as driving up the prices of assets. I chose my words carefully. In this most recent bubble, the Fed and its constituent banks most assuredly drove up the prices of commercial and residential real estate using fraudulent accounting, valuations and securities, all while Greenspan and Bernanke looked on completely untroubled by what they were doing and allowing to be done. A bubble in real estate can be identified. For example, the fact that rental prices were not tracking anything close to real estate prices was a significant indication of a bubble forming; that loan origination standards kept dropping was another one. The myth that bubbles can’t be identified only serves to protect the people doing the blowing: namely the big banks and their conspirators/enablers.
But all we got was pablum about how real estate was “finding its level”, as if the levels it had occupied for decades prior were some kind of massive undervaluation.
Lets be real here, asset inflation is good for those who own assets. Who owns assets? Rich people. Who cares if general prices rise along with wages (price/wage inflation)? Rich people? Why? Because wage inflation takes money directly from their pockets as owners of the capitalist means of production, and general price/wage currency inflation devalues their assets.
So the bankers crush the first sign of wage inflation (while accepting a slow drip of price inflation that, over time also serves to disenfranchise the average person) and let asset inflation explode.
Its long past time our central bank started serving the people’s economy instead of the large private banks. But the Fed was set up to serve them, as they own it. So we need to do away with the Fed and form a true central bank under the control of the treasury. Its not too much to ask, but apparently its way too much to expect.
Oh, and this “phenomenon” of asset bubbles hurts people by making it unaffordable to purchase a home and by driving up rents. It might be okay for some people who own their homes already, at least in the short run (though they certainly aren’t having an easy time selling these days), but everyone else (most of us) who don’t own homes are screwed.
