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This is the weirdest economy…
Federal Reserve balance sheet growth and the Austrian Business Cycle Theory will explain much.
As far as the housing market is concerned, I think COVID hasn’t had a negative effect on the majority of people who had jobs that would enable them to buy a house. So they are taking advantage of the record low interest rates.
Eric – Austrian Business Cycle theory requires easy credit access. Lending standards are pretty tight. Banks aren’t tossing money to anyone like they did in ‘07/‘08. They are lending to extremely qualified borrowers. I do wonder if this is going to compress consumer spending in the next five years though. I suspect people are buying up higher on their debt/equity scale because there is nothing else to do right now.
Hi Nicholas, the ABCT doesn’t address easy credit access (quality of borrower), but increases in bank credit due to central bank actions. The quality of the borrower, meaning who gets first access to this new quantity of credit, would be addressed through Cantillion Effects. Prior to the Great Depression, for instance, much of this new money went to margin borrowers of stocks. Prior to the DotCom Bust, to Silicon Valley. Prior to the Great Recession, housing, especially lower credit quality. This time, it may be going to “higher quality” borrowers, but ABCT and Cantillion combined could suggest that much of this is malinvestment. ABCT looks at “cluster of errors”.
The theory doesn’t specify easy access. But it’s predicated on easy access.
Beige vinyl siding manufacturer’s must be running overtime.