When the Fed did too much QE, buying bonds to put more money into circulation, we have inflation and rising CPI. Now they are leaving the balance sheet at about $8.6T after it was about $4.0T before the pandemic. QT is still very minimal. Inflation continues and the economy keeps growing because the lucky people who have a lot of money are spending and keeping prices rising, probably until the CPI doubles and drives millions of us into poverty. The people who don't have money can't save, and continued rising prices cause the people without money to bear all the burden of the economic slowdown by having to do without basic necessities.
If the Fed would sell many more short term bonds and T-bills to increase the supply, T-bill prices would fall and money market and T-bill rates could be increased to about 8%. I believe 8% short term rates would encourage people who have money to save. Less spending would help keep prices from rising. When those who have money are saving again, then CPI prices remain under control and the people who don't have a lot of money can afford food and a place to live. Letting long term rates remain low would allow building and earnings to continue.
If those not knowing what to do with the extra money keep spending and driving up the prices of housing, the homeless population in the USA will expand. The distribution of housing costs does not fit the distribution of wealth. There is almost nothing on the low end.
The only stock I could find that seems to be building and managing affordable housing solutions is SUI, Sun Communities. They build mobile home communities and RV parks. Are there other stocks that are building and managing housing solutions? A lot of retired people will no longer be solvent if they spend all their savings on rent.
Leave a Reply