Housing Double Dip Has Arrived

Case Shiller index shows home prices have fallen to duble dip levels. Despite two rounds of Quantitative Easing, FED is unable to get the home prices go up again. Unemploymenr remains high. Someone should tell Bernanke that lenders will not lend at low rates if they see him printing money. The day Bernanke announced QE2 marked tha day of the US dollar for the time. Since then the dollar rallied, then went down, and then is going up again, while credit dependent sectors like housing continue their relentless march down.

“Data through March 2011, released today Case-Shiller Home Price Indices show that the U.S. National Home Price Index declined by 4.2% in the first quarter of 2011, after having fallen 3.6% in the fourth quarter of 2010. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.”

This is bad news for the FED and for the banking industry in general. Debt based monetary system and fractional reserve banking creates money as debt. All of our money is interest bearing debt and in order to afford interest payments, we must create new debt faster and faster at an exponentially increasing rate. Banks and the government used housing as an engine of debt growth by encouring people (even sub-prime borrowers) to buy bigger and more expensive homes in order to inflate the money supply to avoid a deflationary crash. It has not worked. The music has stopped.

The great depression is coming. An entire nation cannot borrow for decades, inflate the money supply, prices and salaries with borrowed money and then hope that all will be fine when the pay back time arrives.

Double Dip Recession explained here.

Understand the Federal Reserve Bank

QE2 (Quantitative Easing 2) has ended and we are already discussing whether QE3 is needed or not. So far FED has been printing about 1 trillion a year and inflation has not materialized. Deflationary forces are too great. Bank credit is still deflating. Even though FED has printed almost 3 trillion, total debt which is 65 trillion dwarfs the base money supply. FED's printing did not fix unemployment, did not fix housing. Home prices have reached new lows and are still going down. The question is, can FED's printing press prevent another major crash like 2008?

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