Tags: Anderson | QE3 | housing | bubble

Author Gary Anderson: QE3 Causing a Housing Bubble

Thursday, 27 Sep 2012 08:22 AM

By Michael Kling

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The third round of quantitative easing (QE3) from the Federal Reserve is prompting a real estate bubble that will end badly, warns author and financial expert Gary Anderson.

Through QE3, the Fed is adding to the reserves of banks that in turn lend to hedge funds and other investors buying real estate.

That's prompting a housing bubble in places like Sparks, Nev., and Phoenix, he asserts.

Editor's Note:
You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans


"QE3 is an attempt to blow another bubble in real estate, so that the [Too Big To Fail] banks can be more secure in trusting other banks," Anderson writes in a posting on Business Insider.

Because interest rates are so low, banks don't want to lend to "the average Joe" to purchase homes, he says. Instead, they're lending to wealthy investors and hedge funds who can repay loans more quickly.

And the middle class is having a hard time obtaining mortgages to buy homes or refinance their current home loans. In 2011, he notes, only about 2.4 million homes out of the 4.4 million sold were purchased with a mortgage.

"In my view, the use of housing as a commodity, to be inflated and deflated according to the whims of the Fed, is just wrong," Anderson writes.

"While there may be a short-term benefit of this pumping of housing, eventually the hot money leaves, the wealthy take profits and the average Joe is left with overpriced housing. This causes severe dislocation."

The Fed's QE3 will have little impact on lowering mortgage rates or making home loans more affordable for most people, says The Washington Post. Instead, banks are the main beneficiaries.

Banks say they are not lowering rates because they don't want to be overwhelmed by applications. But critics say they just want to boost profits by keeping a larger difference between rates they charge borrowers and rates they pay to investors buying their mortgage securities, according to The Post.

Editor's Note:
You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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